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Julian Gibbs

With income from building society and bank deposits barely above 3 per cent net and only around 4.5 per cent tax-free on cash Isas, two new plans from NDF – protected income & growth plan I and higher income & growth plan 3 – are highly attractive in that they have huge downside protection.

The first plan offers 6 per cent a year income for five years, with 50 per cent downside protection. If that is breached, there is only a “one for one” downside risk. The 8 per cent a year option, also over five years, offers 40 per cent protection, with a “two for one” downside if this level is breached and does not recover.

Both plans are linked to the FTSE 100 index, which is hovering around the 4,000 mark and is highly unlikely to fall to below 2,000 or 2,400 and not recover in five years.

I personally much prefer the 8 per cent option. To me, a tax-free rate of 8 per cent through an Isa or Pep transfer – about three times higher than the rate of inflation and fixed for five years – is highly attractive.

For bigger investors, direct investments can be made, giving basic-rate taxpayers a net return of 7.2 per cent and higher-rate taxpayers a net return of 5.4 per cent.

Both these plans are far more attractive than tracker funds as I believe that stockmarkets are unlikely to rise by much more than an average of 5-6 per cent a year over the next few years, even though there may be one or two short-term booms in between.

I think that all IFAs specialising in investment should certainly consider these plans, especially as there is a double Isa opportunity enabling a husband and wife to invest £28,000 tax-free.

It is also an opportunity for bigger investors to receive around treble the best building society net rate, with a high level of protection.

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