NDF Administration has established the income and growth plan, a guaranteed equity bond that is linked to the FTSE100 index for three years and two months.
The plan, which is also available as an Isa or Pep transfer, offers investors a choice of 9 per cent income a year, 0.7 per cent income a month or growth of up to 30 per cent at the end of the term. Investors get all their original capital returned at the end of the term, provided the index does not fall by more than 20 per cent during the term. If it does, investors will still get their original capital back where it recovers to at least the initial level by the end of the term.
If the index falls by between 20 and 30 per cent without recovering to the starting level, investors will lose 1 per cent of their capital for every 1 per cent fall in the index. Where the index falls by more than 30 per cent without recovering to the starting level by the end of the term, capital will be reduced by 2 per cent for every 1 per cent fall in the index for the income options. For the growth option, capital will be reduced by 2.6 per cent for each 1 per cent fall in the index.
This bond sits at the riskier end of the guaranteed equity bond spectrum because of its relatively short term and its lack of a full capital guarantee. It would be suitable only for investors who could afford to lose their capital if the stockmarket does not perform well.