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Julian Gibbs

Until now, it has been almost impossible to obtain a reasonable tax-free income plus exposure to the stockmarket with full capital protection. NDF, in conjunction with Abbey National Treasury Services, has come up with the selector income & growth plan. One option offers 3.5 per cent a year income over five-and-a-half years, tax-free through an Isa or liable to 10 per cent tax on sums invested direct by basic-rate taxpayers.

To earn 3.5 per cent a year in a taxable deposit account, a higher-rate taxpayer would have to earn 5.83 per cent gross. This is much higher than the rates offered by banks and building societies on their 60and 90-day notice accounts. For example, Lloyds TSB offers a net rate to basic-rate taxpayers of 1.36 per cent, Halifax 2.88 per cent and Bradford & Bingley 1.76 per cent.

However, the real bonus is that while the capital is 100 per cent secure, a bonus will be paid depending on the performance of the FTSE 100 index of up to 35.75 per cent, which could give a total equivalent return of around 10 per cent a year.

With the growth option, there is a guaranteed minimum return of 120 per cent with the potential for 155 per cent, again based on the performance of the FTSE 100.

For risk-averse and long-term building society investors, this is the ideal investment. It may be suitable, too, for Pep transfers, particularly as there are no explicit charges on this plan.

It is also useful for those investing for school fees, for building up a lump sum at retirement and for parents helping their teenage children save up the deposit for a house. Being capital-secure, it may also suit many pension plans.

The plan also offers the alternatives of a 10 or 7 per cent annual income with a low downside risk.

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