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Julian Gibbs

At the time of writing, the FTSE 100 has slipped to around the 4,000 mark and, while there may be continuing volatility, I do not believe it is possible for the FTSE to fall to below the 2,000 level. This is the 50 per cent downside protection offered by the NDF UK growth plan 2, which offers unlimited growth based on the FTSE 100 index.

To me, this is the lowest-risk way of investing in a tracker fund. For income investors, NDF is also offering the income & growth plan 3, which gives 9 per cent a year tax-free income if invested through an Isa or Pep transfer, with downside protection of 20 per cent. It is also linked to the FTSE 100 but, very importantly, any breach of this 20 per cent does not apply during the first year.

I would be hugely surprised if this 20 per cent barrier is breached after the first year as the stockmarket should surely have began to recover by September 2004. Otherwise, this would be by far the longest UK bear market in history.

At a time when the manufacturing sector is recovering, the outlook for interest rates remains steady and nearly all fund managers are expecting the UK stockmarket to rise over the next year or two, I believe that this is the safest way of taking a 9 per cent a year income, especially as the tax rates are only 10 per cent for basic-rate taxpayers and 32.5 per cent for higher-rate taxpayers outside an Isa or Pep transfer, offering 8.1 per cent and 5.6 per cent net respectively.

Plan assets for both products are invested with Abbey National Treasury Services. For even the most conservative investors who require income or capital growth, these seem to me eminently sensible investments, especially when the returns from building societies and guaranteed income bonds are so much lower.

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