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Julian Gibbs

Nvesta, one of the leading providers in the structured product field, has come up with a new plan which has already received one of the highest ratings from independent analyst Future Value Consultants. It is rated 8.75 out of 10 for higher-rate taxpayers.

The FTSE Focus plan pays 9 per cent a year income or 30 per cent growth over a three-year period and is linked to the performance of the FTSE 100. It has two protection levels and any breach in the first year will be ignored.

The first is 25 per cent, where the capital will be reduced by 1 per cent for each 1 per cent fall in the final level of the index. In case of a breach of 40 per cent or more, capital reduction will be based on 2 per cent for each 1 per cent fall.

With the index level being fixed in December, it comes before the usual rise of the stockmarkets in January, following a rise in optimism after the Christmas holidays. So the downside risk is very low, unless we have total economic disaster.

The assets of the plan are arranged by Merrill Lynch, one of the world&#39s biggest investment banks, which provides the terms set out in the plan. There is a new twist to the plan in that the index is measured at close of business each day rather than using the lowest level the index reaches. As stockmarkets are highly volatile at present, this could be a valuable innovation.

Another plan available at present with similar downside protection is issued by Prudential but this is over five years and the income is only 8 per cent a year. Many advisers do not wish to tie up their clients for a period as long as five years because interest rates on returns from this type of product could be better in three years&#39 time.

Both plans offer about equal security but personally I would prefer to take the 9 per cent option in current market circumstances.

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