Northern Rock has introduced fifty-fifty, a bond that is split equally between a high interest account and a guaranteed equity bond.
The high interest account pays interest at 7 per cent gross a year until December 1, 2003. Investors can make withdrawals during this period, but they lose 90 days' interest as a penalty.
The guaranteed equity bond element tracks the FTSE 100 index for five years and promises the return of original capital however the index performs. The level of the FTSE 100 will be recorded on November 14, 2001 to form the starting level and towards the end of the term an average is taken between November 15, 2005 and November 14, 2006 for the closing level. If there is any growth in the FTSE 100 during the term, investors get 70 per cent of this plus their original investment.
Products that offer a capital guarantee are all the rage because they offer a sense of security, which has become a priority for many investors who are watching interest rates and stockmarkets nosedive.
Combination products like fifty-fifty enable investors to get the best of both worlds while offering a comfort zone from high risk and very low interest rates. However, investors may prefer to do it themselves by going for a high interest account and a separate guaranteed equity bond if they are unhappy with Northern Rock's 50-50 investment split.
According to FTSE, the FTSE 100 index rose from 4042.791 points on October 4, 1996 to 5016.24 points on October 4, 2001.