Protected linked deposit V provides a full capital return regardless of the performance of the index and 80 per cent of the growth in the index at the end of the term. Protected linked deposit VI also provides a full capital return but has a higher participation rate of 100 per cent. However, no commission is paid to IFAs, whereas IFAs receive 2.25 per cent initial commission on the protected deposit linked V product.
With both products, the closing level of the FTSE 100 index is recorded at the start of the term and compared with an average produced over the final six months of the term.
According to the product database on the Structured Retail Products adviser website, three-year FTSE 100 linked products are being offered directly to investors through several building societies such as Britannia, Market Harborough and Scarborough. However, the Barclays three-year protected FTSE plan provides the best comparison, as it is available through IFAs.
The Barclays product provides a full capital return at maturity regardless of index performance, plus 70 per cent of the rise in the index that is calculated using the same averaging process as the Kleinwort Benson products.
The main difference between all three products is the participation rate, but there appears to be a trade off between this and the level of commission received by the advisor. The Barclays product has the lowest participation rate of all three products and pays the highest commission at initial 3 per cent. At the other end of the scale Kleinwort Benson’s protected linked deposit VI has the highest participation rate but pays no commission to advisers.