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Julian Gibbs

Over the past few years, with-profits bonds have been all the rage and

quite rightly because they have shown much better returns than bank and

building society deposits with little risk.

Now, Scottish Life International has launched a real alternative to

with-profits bonds but with potentially higher returns and also with little

medium-term risk.

Investors can choose from a variety of funds linked to world markets but

the one I like bestis the WorldwideWith-Bonus fund.

This will spread investment evenly across five major world indices in the

UK, US, Japan and Europe.

This is how it works. Investors will always receive a bonus unless all

five indices fall by 5 per cent or more over a quarter. No stockmarket

growth is required to provide a full bonus anda partial bonus is added even

if a market fallsby up to 5 per cent.

The bonus rate is set in advance at the beginning of each quarter. The

return over the last 15 years would have been 12.4 per cent a year or 12.5

per cent a year over the last five years, with a low level of risk.

There appears to be no particular reason why this rate should fall in the future.

The plan is written as an offshore bond based in the Isle of Man, so

higher-rate taxpayers can take an income of 5 per cent a year tax-free for

the first 20 years.

Of course, additional income is taxed in full. Like other offshore bonds,

the investor&#39s capital can be sheltered in inheritance-tax-friendly trusts.

As stockmarkets are likely to continue to be volatile, this type of

investment should outperform with-profits over the medium to long term with

little risk.

You pension people really know how to confuse the public. Like me, all my

business friends seem to be completely confused with what is going with

with stakeholder pensions. I provide a pension for some of my staff but the

rest come and go and I can see little point in doing anything for them.

Please tell me I don&#39t have to bother with stakeholder.


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