Foreign & Colonial is introducing a new breed of with-profits fund promising no cross-subsidy and a clear and transparent charging structure.
The F&C with-prospects fund, which is set for launch next month subject to FSA approval, will be contained within an Oeic structure and will invest 60 per cent in global equities and 40 per cent in fixed interest.
The fund's bonus rate, or prospect rate as F&C has renamed it, will be based solely on the expected investment performance of the fund over the coming years. F&C will also calculate a prospect price, which will increase daily at the prospect rate.
If the share price of the fund is higher than the prospect price, all the extra growth will be passed on to investors. The fund carries no exit penalties and clients can sell at the fund's quoted share price at any time.
The product carries an initial charge of 5 per cent and an annual charge of 1 per cent. Commission is 4 per cent initial and 0.25 per cent trail. The minimum investment is £2,500 and, unlike with-profits bonds, the fund qualifies for Isas and Pep transfers. Income can be paid monthly, quarterly or half-yearly.
Sales director Jamie Farquhar says: “Indications are that bigger IFAs are already worried about the percentage of their business which is in with-profits. They are looking for a product to dilute that.
“F&C with-prospects is simple, transparent and tax-free and there are no arbitrary decisions made by actuaries.”