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Nvesta out of step with the rest



Capital-protected bond

Income linked to the performance of the FTSE 100 index

Minimum-maximum investment:
£5,000-no maximum, £7,000 Isa

Five years

6.25% gross income a year

Original capital returned in full provided index does not fall by more than 50% and returns to at least its starting value

Closing date:
July 14, 2004

Initial 3%

Tel: 020 7454 0704

Nvesta has established the safety net income plan, a capital-protected bond that provides income over a five-year term. Investors will get a full capital return plus 1.25 per cent provided the FTSE 100 index does not fall by more than 50 per cent during the term.

Baronworth director Colin Jackson believes this type of product is out of favour at the moment. He says: ” In recent months virtually all products, where return of capital was linked to an index, have lost money. For this reason the investing public are very reluctant to put their money into something similar.”

However, he feels the Nvesta product contains some useful features, for example, the tax treatment which allows investors to use their capital gains tax allowance rather than pay income tax. He adds: “The 50 per cent safety net is more or less in line with the market and the literature is extremely clear and well produced.”

An unusual feature of this product is the adviser remuneration. Jackson explains: “It gives IFAs the choice of either 3 per cent initial commission or 2.25 per cent initial and four annual payments of 0.25 per cent, making a total of 3.25 per cent over the product term.

However, Jackson has one main criticism. He says: “The level of income is too low taking into account the risk. A return of 5 per cent a year is available by investing in guaranteed bonds and building society fixed rate deposits, with the benefit of being risk free.”

Summing up Jackson says: “Nvesta has entered this market with a new product that does not offer a competitive level of income. Furthermore, it will probably be an uphill battle to persuade clients who have recently lost money with similar types of investments to invest.”


Suitability to market: Poor
Investment strategy: Average
Adviser remuneration: Good

Overall 3/10


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