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Julian Gibbs

Several stockmarket-linked bonds have recently matured and will not return investors&#39 capital in full, although, taking into account the income paid, most will have performed better than the stockmarket as a whole.

Some IFAs are now shying away from these products – quite wrongly, in my opinion, because stockmarkets are unlikely to fall by a further 40 per cent or more, which is the downside protection of the better products.

The one I like best for income at present is the NDF higher income & growth plan 4, which is linked to the FTSE 100 index. There are two options. The safer version offers 6.25 per cent income payable for five years with 40 per cent downside protection, with no account taken for any breach of the 40 per cent barrier during the first year. The downside risk is much less than some others in that, if the 40 per cent barrier is breached and the index does not recover, then repayment of capital is reduced at the rate of 1 per cent for each 1 per cent of the fall from the initial index level.

The less safe option – which, in my opinion, gives much better value – offers an 8 per cent annual income for five years. The terms are the same except that, if the protection barrier is reached, the capital repayment is reduced at the rate of 2 per cent for each 1 per cent fall from the initial index level. Both options offer growth alternatives.

It is highly unlikely that shares will fall by a further 40 per cent and not recover over a five-year period. It is also unlikely that the stockmarket will rise by more than 8 per cent a year over a five-year period so I believe that the 8 per cent option is much better value than a tracker fund with a much lower downside risk. Both these plans are very highly rated by Future Value Consultants, the independent analyst.


Watchdog&#39s tough line on bonds

The Financial Ombudsman Service says it now expects to receive 3,500 complaints next year from disgruntled investors who have lost cash through investing in index-linked income bonds.The FOS has budgeted for 1,000 more complaints than it expects to receive this year after being surprised by the numbers of investors who claim to have been led […]

Legal & General says its plans can shield Isa cash from risk

Legal & General is urging investors to preserve the funds built up in their Peps or Isas by transferring to its protected index plan 2 or index growth and protection plan.It says many investors have built up big capital sums over the years and may want to protect capital from stockmarket turbulence.It says by transferring […]

IMA in tax plea as fund sales suffer

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There&#39s gold in those Yorkshire Hotspots

Bradford & Bingley says common sense is creeping back into the housing market.Its latest statistics show that house prices have slowed, growing by 2.2 per cent over the last six months.B&B says the market has levelled off, with the average home priced at £144, 838 – up from £141,607 in October.The statistics show that while […]


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