Lloyds TSB has introduced a guaranteed equity bond that offers investors a minimum return of 20 per cent plus their original capital after five years.
The London guaranteed equity savings account is only available over the phone. It is linked to the performance of three stockmarket indices, the FTSE 100, Eurostoxx 50 and Nikkei 225. To calculate the final return, the monthly average of each index is recorded then added together to produce a growth percentage. Investors get 100 per cent of this growth.
The strong point of this product is that there is a minimum return above that of the original capital, which is comforting for investors who are wary of risk. Other guaranteed products that are aimed at the lower end of the risk scale, such as Newcastle Building Society's recently established capital safe bond, do not have this feature. The Newcastle product tracks the same indices as the Lloyds TSB product, but growth is capped at 85 per cent.
The Nikkei 225 fell from 21612.30 points on October 18, 1996 to 10474.85 points on October 18, 2001.Over the same period, the FTSE 100 rose from 4053.083 points to 5116.030 points and the Eurostoxx 50 rose from 1734.83 points to 3469.78 points.