Structured products can be categorized as either structured deposits or structured investments. Structured deposits are cash-based products that provide greater security than structured investments in that the return of capital never depends on the underlying asset performance and Financial Services Compensation Scheme protection will apply to eligible investors if the deposit taker goes bust. However, returns tend to lower than structured investments, which often put capital at risk depending on index performance.
Inflation deposit issue one has a term of five years and nine months. At maturity, it will provide a return equivalent to 100 per cent of the growth in the UK Retail Price index between June 2011 and March 2017. Investors will also receive their original capital back in full at the end of the term, regardless of the index performance.
Jubilee has also introduced a structured investment linked to the performance of the UK Retail Price index, Inflation Plus Plan Issue One. But to enable investors to benefit from the higher return potential of 165 per cent of the growth in the index, the return of capital is dependent on the FTSE not falling by more than 50 per cent.
Investors looking for the extra security of a structured deposit can find many products linked to the performance of the FTSE 1o0 available through intermediaries. Morgan Stanley has an income plan linked to the RPI, but for the growth the competition is likely to come from direct products offered by building society.
One example is Yorkshire Building Society’s six year protected capital account – inflation linked 8. This offers the higher of 100 per cent of the growth in the RPI or 16 per cent growth on the amount invested.