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Julian Gibbs

The plan pays 10 per cent a year income over three years or alternatively gives 30.25 per cent growth. Capital is returned in full provided the Eurostoxx 50 index does not fall by more than 20 per cent.

The returns are tax-free for Isas and Pep transfers and are an excellent way for those wishing to lock in their Pep money to earn 10 per cent a year tax free. This makes it far more attractive than investing in any tracker fund.

Direct investments can be made into the plan. Basic-rate taxpayers pay only 10 per cent tax on income, which is equivalent to 11.25 per cent gross. The growth option is an ideal way of using up CGT allowances and, on this basis, is equal to a taxable return of 37.8 per cent for a basic-rate taxpayer or 50 per cent for a higher-rate taxpayer.

According to independent analyst Future Value Consultants, the risk to capital of linking one of these plans to the Eurostoxx 50 index is significantly less than linking one to the Nasdaq 100 index. The Nasdaq 100 has fallen by 25 per cent since its high of this year but the Eurostoxx 50 is only 7 per cent off its high and is up by 5 per cent for the year to date compared with a fall of 7 per cent for the Nasdaq.

Over the next three years, I believe European shares will outperform US and UK shares. This plan is certainly one that should be considered by low- to medium-risk investors seeking high tax-efficient income or growth.


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