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Julian Gibbs

Despite interest rates being at their lowest for more than 40 years, the highly popular NDF extra income & growth plan series has been able to revert to an income of 10 per cent a year after a brief fall to 9 per cent a year on a previous plan.

I did not think we would see this 10 per cent return again for a long time. The downside risk is very low as the Eurostoxx 50 index would have to show a fall of more than 20 per cent during the investment period and fail to recover before any capital was lost.

The Eurostoxx 50 index is over 25 per cent off its high and the likelihood of a further 20 per cent loss is remote.

The plan looks particularly attractive for married couples who can invest up to £28,000 through double Isa allowances as well as an unlimited amount through Pep transfers without having to pay any tax.

It is also attractive from the capital gains tax perspective. The growth option offers a 33 per cent return. Everyone, including children, can invest £23,900 directly into the growth option and receive £7,887 tax-free by using their capital gains tax allowance. This option can be particularly useful for paying school fees.

Very few IFAs have taken advantage of this type of plan to invest their clients&#39 Sipp money even though a likely return of 33 per cent over three years is much safer than investing directly into equities. The income option is also an ideal investment for trustees where the beneficiaries require a high income as there is very little risk to capital.

With the equity market likely to remain volatile, a 10 per cent a year tax-free return is particularly attractive. It is easy to see why this type of low-risk product is “top of the pops”, particularly when both interest rates and European stockmarkets are so low.


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