Obtaining a high tax-free income is a priority for elderly people who want to supplement their pension, while building up capital tax-free is the priority of younger investors who want create a nest egg for their retirement.
With interest rates now exceptionally low and likely to fall further, the problem is where to invest. I believe GE Life has the answer.
Europe is probably the best investment area because positive tax changes are taking place at personal and corporate levels. Share ownership in Europe is widening and, as people now invest for the longer term, equities in euroland should be well supported by those having to provide for their own pensions.
The problem is that European equities yield very little. However, the new GE Life High Income & Growth Plan V offers the best of all worlds. It pays 10.25 per cent a year income for three years – tax-free for Isas and Pep transfers – while, for bigger direct investments, tax on income is only paid at 10 per cent or 32.5 per cent for higher-rate taxpayers.
The plan is linked to the EuroStoxx50 index, which comprises leading blue-chip companies in the eurozone. Capital is returned in full provided the index never falls by more than 20 per cent from the starting level during the term of investment or, if it does, the final index level is at or above the initial index level.
In current circumstances, this is most unlikely to happen. To me, this product offers the best way of taking an income from European stocks with very little risk to capital. There is also a growth option of 33 per cent.
The EuroStoxx50 index was introduced in January 1992. If this plan had been in force using the same investment formula, capital would have been returned on 100 per cent of all equivalent periods.
On average, the final index level would have been 182 per cent of the initial index level.