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Julian Gibbs

Scottish Widows has produced a highly innovative high-income plan offering 10.25 per cent a year over three years or 33 per cent growth. It has a low downside risk in that each of the 30 FTSE stocks to which it is linked can fall by 20 per cent over the period without any loss of capital.

As a Dublin-based company, returns are tax-free through an Isa or Pep transfer while only 10 per cent tax is payable by basic-rate taxpayers who invest outside an Isa or a Pep. This represents an exceptionally high net annual income of 9.2 per cent for basic-rate taxpayers whereas it is difficult to obtain 5.5 per cent net from a building society.

The growth option offers a useful way of using up the tax-free capital gains tax allowance.

Most of the shares to which it is linked are well off their recent highs, which means now is a good time to invest. The 30 stocks are each equally rated at a 30th of the value of the basket and include such well-known names as Abbey National, Cable and Wireless, HSBC, Legal & General, Prudential and Reuters.

Back-testing over the past 10 years shows the lowest capital return would have been 98.6 per cent and the average performance 99.8 per cent.

There is a small risk of capital loss but the downside is only on a one-for-one basis whatever happens to the shares. Even if one stock falls by 50 per cent and the others by 20 per cent or less, the capital return for a £10,000 investment under the growth option would be £13,133.

It is a much better bet than a tracker fund and

is ideally suited for all those investors who are prepared to take a small risk in return for a considerably higher income or capital gain.

I expect this plan to attract a lot of money.

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