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Morgan Stanley on the search for income

Morgan Stanley IQ has introduced issue four of its FTSE income plan, a structured product designed to provide a fixed annual income of 6.6 per cent regardless of the performance of the FTSE 100 index.

The plan also offers some protection for market falls at maturity in that the original capital will be returned in full to investors provided the index does not fall by more than 50 per cent during the term. If this safety net is breached, the index needs to recover to at least its initial value at the end of the term, otherwise investors will 1 per cent of their capital for each 1 per cent fall in the index.

Investors looking for a structured product to provide a fixed level of income over six years could choose the Barclays Wealth regular income bond December 2010, which is due to close on January 17. Its fixed annual returns are lower at 5.5 per cent, but it has a monthly income option, paying 0.45 per cent, that the Morgan Stanley product lacks. The capital protection on offer from the Barclays product is on the same basis at the Morgan Stanley plan.

As at January 5, 2011, a higher fixed income over six years than the Morgan Stanley plan provides can be achieved from plans linked to more than one index, or where part or all of the income is linked to index performance. Incapital Europe’s equity income plan provides a 1.75 per cent maximum quarterly income – equivalent to 7 per cent a year – but this, and the return of the original capital, depends on FTSE 100 performance. The six-year Jubilee regular income plan is linked to the FTSE 100 and S&P 500 and pays an unconditional 2 per cent quarterly income in year one, but further income payments depend on index performance.


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