nvesta has unveiled the safety first plan, a guaranteed equity bond that is linked to the FTSE 100 and S&P 500 indices over a three-year term.
The bond provides a choice of annual income at 8 per cent, monthly income at 0.62 per cent a year or growth at 26 per cent at the end of the term.
The closing level of each index is recorded at the start of the term on February 13, 2003. The performance of the indices will be ignored during the first 22 months of the term, but will then be monitored between December 13, 2004 and December 13, 2005.
Provided the indices do not fall by more than 30 per cent during this 12-month period, investors will get a full capital return at the end of the term. If it does fall during this period, investors will still get their capital back if it recovers during the final two months of the term. However, if it does not recover, investors will lose 1 per cent of their capital for every 1 per cent fall in each index.
This bond is similar to GE Life's income option plan 3 and NDF's selector income and growth plan 2, but these products have a menu of options with higher returns than the nvests plan. This makes them more complicated and both rival products could reduce investors' capital at double the rate of the nvesta plan.
However, one drawback of the nvesta plan is that the capital returns is dependent on two indices, so if they both fall by more than 30 per cent, capital erosion could be on a par with the rival products, which are dependent on one index only.