Eurolife has produced yet another ingenious high-return product called the Bluechip Plus Plan. It pays 10.5 per cent a year, 0.82 per cent a month or 34 per cent growth over three years, tax-free through Isas and Peps.
With the stockmarket at current levels, this can be regarded as a lowto medium-risk plan as shares can go down by 20 per cent from current levels over three years and still return capital in full.
Many investors will regard this risk as acceptable. Furthermore, for those investors who want to have a bigger direct investment, basic-rate taxpayers pay only 10 per cent tax and higher-rate taxpayers only 32.5 per cent on the income.
Growth investors can secure tax-free returns by using their capital gains tax allowances.
The plan is linked to the top 10 stocks in the FTSE 100 index, which account for over 50 per cent of its market capitalisation. These shares are BP, GlaxoSmithKline, Vodafone, HSBC, Shell, Astra Zeneca, Royal Bank of Scotland, Lloyds TSB, Barclays Bank and BT.
It is unlikely that any of these shares will be 20 per cent lower in three years time but, if the final level was below this, then the loss would only be 0.625 per cent for each 1 per cent fall below the 80 per cent hard protection barrier. So, for example, if BP stood at 500p at the opening and the final closing price was 350p, then the capital return would be reduced by 6.25 per cent.
This plan offers the highest rate of return of any plan now available with such a low downside risk and commission terms are more generous than usual.
The terms were set before the recent cut in interest rates.