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Julian Gibbs

Another innovative plan from NDF with assets backed by Abbey National Treasury Services – the Extra Income and Growth Plan V1 – is being launched on February 19.

This plan gives a fixed income of 10.25 per cent over three years or growth of 31 per cent for Isas and Pep transfers. This is equivalent to 12.8 per cent and 38.75 per cent respectively for basic-rate taxpayers. Investments can be made outside an Isa or Pep with only 10 per cent tax on income being paid by basic-rate taxpayers and 32.5 per cent by higher-rate taxpayers.

So the net returns outside an Isa or Pep are 9.2 per cent for basic-rate taxpayers and 6.9 per cent for higher-rate taxpayers – much higher than any returns available from bank and building society deposits. The growth option is also an ideal and comparatively safe way of using up the 2004/05 capital gains tax allowance to produce tax-free growth.

The capital return is linked to the Nikkei 225 index which can fall by as much as 20 per cent over the three-year period and investors will still get all their money back.

It would have to fall to levels not seen for more than 16 years before there was any possibility of capital erosion.

It is always sensible to invest at times when stockmarkets are low and the Nikkei 225 is more than 60 per cent off its all-time high. It is highly unlikely to fall a further 20 per cent. In my opinion, this is a safer plan than those linked to the FTSE 100 or Eurostoxx 50 indices in current market conditions. Independent analysts Future Value Consultants rates this plan highly. It has given a score of eight out of 10 for both basic- and higher-rate taxpayers, which is a higher rating than for the vast majority of plans of this type.

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