Norwich Union has introduced the fixed income plan 4, a
capital-protected bond that gives investors a choice between monthly,
annual or rolled-up income over a five-year term.
The bond is also available as an Isa or Isa/Pep transfer. It is linked to
the FTSE 100 index and pays 5.65 per cent income a year, 0.44 per
cent income a month or roll-up income of 31.15 per cent at the end of
the term. Investors' original capital is returned in full provided the
index does not fall by more than 30 per cent during the term without
recovering to at least its starting level by the end of the term.
If the index falls by more than 30 per cent and does not recover to its
starting level, investors will lose 1 per cent of their capital for every 1
per cent fall in the index below the starting value. If only one of these
events happens, investors will get a full capital return.
This bond is likely to suit investors, possibly those who are in or near
to retirement, who need income. Most current structured products are
designed for growth so this product could meet the needs of income
investors who are prepared to take some risk with their capital to
achieve this objective.
Keydata's extra income plan is a similar bond that is also linked to
the FTSE 100 for five years, but it differs from the Norwich Union
product in that it has two annual, quarterly and roll-up income
Option two of the Keydata plan provides a good comparison, as
investors will lose 1 per cent for every 1 per cent of their capital on the
same terms as the Norwich Union plan. Under this option, investors
can choose 5.75 per cent annual income - which is higher than
Norwich Union's rate ǃ.38 per cent quarterly income or 30 per cent
growth which is lower than Norwich Union's roll-up option.