Newcastle Building Society has introduced the second issue of its global guaranteed equity bond, an individual savings account (Isa) for investors with maturing tax exempt special savings accounts (Tessas).
This Isa would appeal to investors who want to reinvest the proceeds of their Tessas. It will track three stockmarket indices the FTSE 100, the Nikkei 225 and the Dow Jones Eurostoxx 50. The starting levels of the indices will be taken on July 13, 2001 and are monitored for the next five years. A monthly average is taken every 12 months and these are added together to calculate the final return. For early investments, interest equivalent to six per cent a year is paid until July 13, 2001.
Cautious investors who understand how the stockmarket works but who do not feel ready to jump into it head-first may find this Isa useful. Global stockmarkets are currently at a low point and some investors may feel optimistic that they will rise within the next five years.
Many capital protected Tessa only Isas like those from NDF Administration and Bristol & West, are linked to just the FTSE 100. In one sense, the Newcastle Building Society Isa dilutes investment risk because investors are not dependent on one index. But the downside is that one of the indices could drag down the final return, even if the other two perform well.