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Julian Gibbs

It looks to me as if the days of income products paying 10 per cent a year are coming to an end. There is, however, a reasonably secure option, with a 65 per cent growth alternative, to be launched shortly by Eurolife under terms fixed some time ago.

The plan runs over five years and two months – long enough to be almost certain that the indices to which it is linked will be above initial levels.

A strong safety feature is that the indices can fall 35 per cent below the opening level before there is any possible capital loss. Provided that the indices are all above 95 per cent of the opening level when the plan matures, the capital will be returned in full.

Eurolife is also offering a capital-secure option over five years and two months which gives 8 per cent a year annual income or 45 per cent growth. Provided that no index falls by 30 per cent, the investor is repaid in full.

In the event of huge falls, the minimum overall return of income and growth is equal to the original investment. Interim capital losses are at 1 per cent for each 1 per cent fall. The indices to which these plans are linked are the FTSE 100, Nikkei 225 and S&P 500.

The Nikkei 225 is over 70 per cent off its high while the FTSE 100 and S&P 500 are 25 per cent and 28 per cent off their highs respectively. It is highly unlikely, unless there is a world recession, that any of these indices will fall by a further 30 per cent or more.

With the high levels of protection, both these products are reasonably safe. Conservative investors might like to go for a capital-secure product but I believe that most investors should opt for the 10 per cent income option. I believe that 10 per cent a year income or 65 per cent growth – tax-free if invested through an Isa or Pep transfer – will look very attractive in five years time.


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