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L&G offers high income Isa


High Income Isa

Type: Corporate bond mini or maxi Isa.

Aim: Income from investing in corporate bonds.

Minimum investment: Monthly £30, lump sum £500.

Maximum investment: £7,000.

Catmarked: Yes.

Investment choice: 100 per cent corporate bonds.

Yield: 8.5 per cent.

Charges: Annual one per cent.

Withdrawal penalty: None.

Commission: Subject to negotiation.

Tel: 02920 448412.

Suitability to market 7.0

Investment strategy 7.3

Past performance 7.3

Company’s reputation 8.0

Charges 8.6

Commission 6.0

Product literature 7.6

Legal & General has introduced the high income Isa, an individual savings account (Isa) that invests in corporate bonds in order to provide an income for the investor.

Looking at how the Isa fits into the market, Jackson says: "Legal & General is a very useful company and this Isa will be well received by the market as it will complement an income portfolio well."

Wingar says: "There has been very little marketing of income products recently. As a result, this product should be reasonably well received."

Buswell says: "With interest rates low and likely to go even lower over the coming months, this product comes to the market at the right time and fits well."

Moving on to the type of client that the product is suitable for, Wingar says: "There are two types of potential client here, First there are low risk clients who are looking for income. Secondly there are wealthy clients who are using just their Isa allowance to boost income."

Jackson says: "This is suitable for four types of clients. There are higher rate tax payers, retired clients who have income requirements, cautious investors who use corporate bonds regularly and basic rate tax payers who want higher rate tax free returns."

Buswell takes a slightly different view. He says: "This is suitable for those looking for a high income, but who are prepared to accept an element of risk to their capital."

Commenting on the marketing opportunities that the Isa provides, Jackson is positive. He says: "The marketing opportunities are very good, especially as the tax year is coming to an end. It gives the opportunity for utilising this year’s tax allowance and perhaps also next years. This can be a good way to reopening the door to a client who needs a review of their finances."

Buswell says: "With interest rates so low and likely to go lower, this is the ideal time to be launching a vehicle of this type."

However Wingar says: "Personally, there are no marketing opportunities here. Our investment planning favours investing for growth and spending growth as income, as well as utilising capital gains tax allowances."

Identifying the strong points of the product, Wingar says: "This product offers 8.5 per cent income tax free, is cat-marked, so it has low charges, and also has concise literature."

Jackson agrees. He says: "The plus points of the product include the fact that it has a high yield, low costs, no exit penalty and no initial fee."

Buswell says: "The income of 8.5 per cent net of tax, as well as Legal & General’s name and reputation will be the major strong points."

Looking at the product’s drawbacks Jackson says: "In order to receive a higher yield more risk is taken, so this product is not an investment for the very cautious investor. Other than the fact that there are no guarantees attached to the product I cannot see any other disadvantages."


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