I am usually opposed to investing in stockmarket-linked bonds that run for
less than three years but I have found an excellent exception that proves
the rule. This is the new NDF Extra Bonus Plan 3 plan backed by Abbey
National Treasury Services.
It pays either 10 per cent growth or 12 fixed monthly payments of 0.73 per
cent of the capital invested. There is a final payment of 100 per cent of
the initial investment, unless the FTSE 100 index falls by more than 20 per
cent from its initial level.
I have done some investigation and asked 10 major forecasters, such as
Merrill Lynch, UBS and Salomon Brothers, how much they expect the index to
rise by the end of December this year and by the end of December next year
from a level of 6,107.
The average rise forecast for the end of December this year is 9.2 per
cent. UBS forecasts a fall of around 1.8 per cent while ABN Amro makes the
most optimistic suggestion of a rise of 16.5 per cent.
Those who are prepared to look to the end of 2002 forecast an average
increase of 8.1 per cent. So, to me, a 10 per cent guaranteed return,
provided the FTSE 100 index does not fall by more than 20 per cent, is an
It is much better than a tracker fund. Of course, returns are tax-free if
invested in through an Isa or if the gain is within the investor's capital
gains tax-free allowance.
With interest rates at near record low levels and likely to fall further
still, a 10 per cent tax-free return over 13 months is very attractive.
A husband and wife could invest £82,000 and receive £8,200
tax-free by using up both their capital gains tax and Isa allowances. To
me, this is a pretty safe bet and a far better option than keeping money on
deposit at a building society or bank.