Eagle Star has introduced a unitised with-profits bond that offers investors the choice of three charging options.
The bond aims for income and growth by investing in a range of 12 unit-linked funds that include UK equity, European, North American, with-profits and property funds. It has a current annual bonus rate of 5.25 per cent and switching between funds is free.
Investors can choose from no exit charge, standard charge or no initial charge versions of the bond.
Those who choose the no exit charge version will have the lowest allocation rates at 95-96 per cent, but they also get the highest loyalty bonus at 4 per cent after ten years.
The standard charge version has higher allocation rates at 97-98 per cent, but they get the lowest loyalty bonus of 1 per cent after 10 years. If investors cash in the bond during the first five years, they must pay a penalty which falls from 5 per cent in year one to 1 per cent in year five.
Investors get the highest allocation rates of 100-101 per cent with the no initial charge version of the bond, but they will be the hardest hit if they cash in the bond early. They must pay a penalty of 8.5 per cent in year one which reduces to 2.5 per cent in year five. A loyalty bonus of 3 per cent is awarded after 10 years.
The positive side of this product is that investors can choose from a range of funds and opt for the charging structure that suits their needs. Also, the charges are transparent. However, investors' confidence in with-profits may be low since the downturn in global stockmarkets is prompting some with-profits providers to slash their annual bonus rates.