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Inora Life brings in with-profits alternative

Inora Life, the Dublin-based offshoot of Societe Generale, has designed a capital protected offshore bond as an alternative to with-profits bonds.

The protected profit bond has a five-year term and is available in an income and a growth version.

Investors with the growth option get 100 per cent of their original capital returned after five years while the income version offers quarterly income of 2.5 per cent, plus the remaining 50 per cent of original capital returned at the end of the term.

Investors receive bonuses which are similar to those offered by with-profits bonds. Those with the income version are paid a fixed bonus of 5 per cent, while those with the growth option receive 10 per cent.

A terminal bonus is also payable on maturity but this depends on the performance of a stockmarket index. Investors can choose to link the bond to the Nasdaq 100 index or the Eurostoxx 50 index.

The Nasdaq 100 index has a maximum potential bonus of 150 per cent of the original investment while the Eurostoxx 50 has a maximum potential bonus that is lower at 100 per cent. This reflects the specialist, high-risk nature of the Nasdaq 100 index compared to the broader blue-chip based Eurostoxx 50.

A monthly average of the index is taken throughout the term and averages that have fallen are added together then deducted from the maximum potential return, which produces the terminal bonus.

Investors who want full capital security may be attracted to this product. Its advantage over with-profits bonds is that investors know from the outset what the fixed bonus rate is and they are told how the terminal bonus is calculated.

However, this is quite a complicated product to explain. Some investors may find it difficult to grasp how the terminal bonus is calculated and as the charges are implicit with the product, the attempt at transparency is compromised.

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