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Julian Gibbs

Most forecasters do not expect any of the major stockmarkets to show much return in 2001. As interest rates look likely to come down, this means high-interest returns will be even more difficult to find. One alternative is to buy high-yielding corporate bonds which might give overall returns of 8 to 9 per cent with low to medium risk to capital. Another option which might be worth considering is a new plan issued by NDF, with the plan assets backed by Abbey National Treasury Services.

This gives a choice of a 10 or 12 per cent tax-free return over 13 months for Isa and Isa/Pep transfer investors. Larger investors can invest in the Extra Bonus Plan to enable them, together with their partners and their children, to take full advantage of their tax-free CGT allowances as the returns are treated as capital gains.

In my opinion, the 10 per cent option is the most sensible choice because the Eurostoxx 50 index, to which the capital return is linked, can fall by up to 25 per cent without the return being reduced. At present, the Eurostoxx index is around 12 per cent off its high and I believe it is most unlikely to fall by a further 25 per cent over the next year. To me, this is an exceptionally safe way of locking into a 110 per cent return.

The other option is to receive a 12 per cent return over the 13 months, with any fall in the Eurostoxx index reducing the return. However, even if there was a fall of 10 per cent or more in the index. there would still be a capital return of 100.8 per cent, which is better than a tracker. I have discussed this plan with several top investment managers and all of them think the 10 per cent option is a real bargain.


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