View more on these topics

Newcastle links bond to blue chips

Newcastle Building Society&#39s guaranteed blue-chip bond is a combination of a five-year guaranteed equity bond with a two-year fixed rate high-interest account.

The guaranteed equity bond element is linked to the performance of 20 global blue-chip stocks, including McDonalds HSBC and Nokia. Investors must place 75 per cent of their capital in this element and the return of the original capital is guaranteed, regardless of the performance of the stocks. They will also get up to 50 per cent growth.

To calculate the growth the prices of the 20 stocks are recorded on June 16, 2003 and an average is taken. This is compared with an average figure produced during the final 14 weeks of the term. Any rise or fall in each individual stock during each week is combined to produce an average and this figure is capped at 50 per cent. A final average is produced from the valuations of all 20 stocks and this is compared with the starting value.

The remaining 25 per cent of investors&#39 capital goes into the high-interest account element. This is fixed at 7 per cent gross a year for two years and no withdrawals are allowed during the fixed-rate period.

The Newcastle product sets itself apart from similar products such as Northern Rock&#39s Fifty:Fifty by being linked to a basket of stocks rather than an index, but this also makes it more complicated.

Also, a handful of stocks that perform badly will have a greater influence on the final return within basket of stocks than within an index. However, stocks that outshine their peers could enhance returns which would be watered down if held within an index.

Recommended

Live wires plug into the pension problem

IFAs advising on pensions are facing a critical time. Many industry commentators feel the Government&#39s Pensions Green Paper does not go far enough towards fixing the problems in the market or providing a stable framework for the future.At the Money Marketing Live conference at London&#39s Olympia on May 13, ABI head of pensions and savings […]

Property is still seen as safe haven

Property is still the most popular refuge for the nation&#39s savings despite a reduction in spending as a result of the Iraq war, says Yorkshire Bank in its latest housebuyers&#39 survey.The survey found that one in 10 homeowners are now considering their spending much more carefully, with the current situation in the Middle East causing […]

&#39Ultimate good faith&#39 and the Pru

When I joined this industry as a recruit nearly 40 years ago I attended an induction course with my new employer, Refuge Assurance Company.Three words were my first and indeed lasting thoughts of the new career in front of me – ultimate good faith.Remember that advert, the man from the Pru, with his bike, his […]

Advisers demand rebroking redress

IFAs are demanding that the Prudential pay compensation for the time they will have to spend rebroking criticalillness policies following the life off-ice&#39s decision to remove guarantees and raise premiums on new and pipeline business.Advisers say they face rebroking dozens and, in some cases, hundreds of policies and they plan to send invoices to the […]

Japan: mid-year review and outlook

By Chris Taylor, Manager of the Neptune Japan Opportunities Fund H1 2014 Economy: after a harsh winter that slowed activity in the economy, the main event of the first half of the year has been the debate over what impact the 1 April VAT hike from five to eight per cent would have; we are […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment