The bond provides an alternative to corporate deposit accounts and enables advisers to earn an income from managing corporate cash. It is available for lump sums of between £100,000 and £10m.
Companies can choose from three funds – variable rate, 30-day notice and 90-day notice funds. The variable rate fund has no notice period for withdrawals and switches, but its interest rates can be changed at any time. The 30-day notice and 60-day notice funds require investors to give notice for withdrawals and switches, but the interest rates are higher than the variable rate fund. Interest rates for all funds depend on the amount invested and the amount of IFA commission that is taken. Advisers can choose renewal commission of up to 0.25 per cent a year.
Switching between funds can be made at anytime subject to a £25,000 minimum, but at least £50,000 must remain in the fund from which the switch was made. If investors want to switch into a fund from more than one fund the minimum from each fund is £10,000.
This product will be competing with corporate deposit accounts that may not provide any commission to IFAs. Newcastle Building Society has just launched a range of accounts available through its intermediary services arm. However, these have lower investment levels of £5,000 to £1m, so are targeting a different area of the corporate market to Cardiff Pinnacle.
As a life insurance bond, the Cardiff Pinnacle product provides better protection than deposit accounts for amounts above £55,334 under the Financial Services Compensation Scheme if the company cannot meet its obligations, which could provide a comfort factor to corporate clients.