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L&G Isa performs for investors

Legal & General has introduced the performance bond individual savings account (Isa) as a follow up to its predecessor, which has now matured.

The Isa is linked to the FTSE-100 index and has a growth and an income option. Investors who are looking for regular income will get 7 per cent a year during the five-year term. If they go for capital growth, they will get a fixed return of 40 per cent after five years.

If the index is the same or higher in the last three months of the term than it was at the start, investors will get all their capital returned. If investors take income and the index falls, their original capital will be reduced by the same percentage as the drop. Where an investor has chosen the growth option, the reduction will be applied to their 40 per cent return.

The downside of the Isa is that even if the index performs well for most of the term, it could fall below the starting level in the last three months of the term. This would result in capital erosion as there is no capital guarantee.

The FTSE-100 index rose from 3726.641 points on February 12, 1996 to 6241.38 points on February 12, 2001.

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