Northern Rock and Legal & General have linked up for the second time to create the second edition of balance-choices.
Balance-choices combines an instant access savings account from Northern Rock with Legal & General's with-profits income bond.
Investors must place at least half of their investment, but no more than 80 per cent, in the Legal & General with-profits bond. The rest goes into the savings account element, which pays interest at 8 per cent gross a year until July 1, 2002. This is higher than the previous issue of the product, which was fixed at 7.05 per cent gross. Investors have unlimited penalty free access to this part of their investment, even during the fixed rate period.
The with-profits element of the product is made up of shares, fixed interest securities and commercial property. The return is provided through an annual bonus rate, which is currently 6.25 per cent, but this could vary in subsequent years depending on how the underlying investments perform and on Legal & General's view of future performance.
Products that are split between a savings account and a bond are becoming popular and this may be because they are in tune with the cautious mood currently felt by many investors. Those who are unsatisfied with low interest rates offered by savings accounts but who are reluctant to make stockmarket investments, may be looking for a compromise such as balance-choices.
However, some investors may also give with-profits bonds a wide berth after bad publicity following the slashing of annual bonus rates by some companies.