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Julian Gibbs

A very interesting new product from Keydata – the defined growth plan – gives 52 per cent growth over five years, equivalent to 10.4 per cent simple interest a year, even if the FTSE 100 index does not go up over that period.

The plan also pays out this growth if the FTSE 100 falls at any time during the term of the plan but returns to at least its starting level.

Even if the market goes down over a five-year period, which is highly unlikely from current levels, then investors will still receive a full return of capital unless the index falls by more than 50 per cent from its starting level and fails to recover when the plan ends. If this were to happen, capital would be reduced by 1 per cent for every 1 per cent of index underperformance.

This would mean that the FTSE 100, which is now at around 4,500, would have to fall to its lowest level for over 13 years for capital to be at risk.

This plan is suitable for Isa investments and also for Sipps and Ssas as well as direct investments. Returns would be tax-free on Isas, Sipps and Ssas.

For direct investments, where the investor makes no other capital gains in the first year and provided that the tax-free capital gains allowance does not reduce, around £16,000 could be invested without paying capital gains tax.

The capital security underwriting the product is provided by medium-term loan notes issued by financial institutions with a credit rating of AA or better.

This product should be particularly attractive to disenfranchised with-profits bond investors seeking an investment away from the underperformance penalties afflicting their existing bonds. It is a good way for investors in closed funds to recover their money over five years and make some profit.


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