The new Nvesta secure multi-tracker plan is a much better product than conventional tracker funds in that it is capital-protected and offers a return of 110 per cent of the rise in the FTSE 100, S&P 500 and Nikkei 225 indices in equal proportions, with the returns being uncapped, unlike many other capital-protected products.
It is a six-year product, with the final index levels being defined as the average of the monthly closings in the final year.
With markets much lower than five years ago – down an average of about 20 per cent, with the S&P 500 performing worst – now should be a good time to invest as markets should continue to rise over the longer term.
For example, if this product performs in line with the average of these equity markets over the past 10 years, which I think is a fair assumption taking into account the past five years' poor performance, then this product would give a return of over 90 per cent – not bad for a six-year investment with no risk to capital.
From a taxation point of view, the profits are taxed as capital gains which, of course, are tax-free if invested in through an Isa. For direct investors who have no other capital gains, the first £8,200 is tax-free. This figure usually goes up by inflation each year. The balance is taxed at a maximum rate of 32 per cent for higher-rate tax payers and 16 per cent for basic-rate taxpayers due to taper relief.
This is an excellent way for people to build up capital for retirement and also a good way for parents to help their children build up capital. This product is highly rated by Future Value Consultants and is the best product of its type available at present.
A word of warning, though. Avoid capital-protected products where the returns are capped because, at current stockmarket levels, investors may lose out.