Secure Pension Tracker
Capital-protected bond for pensions
Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: £20,000-no maximum
Up 10 110% growth
Original capital returned in full regardless of performance of index
April 16, 2004
Tel: 020 7454 0704
Nvesta's secure pension tracker plan is a capital-protected bond that is aimed at the occupational pension and self-invested personal pension markets. It is linked to the FTSE 100 index for a term of six years and offers the return of the original capital plus 110 growth in the index.
Informed Choice technical director Martin Bamford thinks the product could be an alternative to tracker funds for pension investors. He says: “The guarantee associated with this product is appealing at 100 per cent of the capital invested at the end of six years. The gearing of any returns is also attractive. This investment will be easy for clients to understand, which is good for any guaranteed or protected product.” However, he adds that the return available on early encashment is more complicated for the investor to understand.
Bamford points out that the final level of the index is calculated by taking the average closing value over the last six months of the investment. He says this would avoid the client being disadvantaged by a fall in the index on the last few days of the term, but he feels six years might be too long a term for some clients.
Highlighting the potential drawbacks of the product Bamford says: “Investors will miss out on dividend income as a result of the investment being linked to the index rather than individual shares. Also, the capital security of this product will be dependent upon the security of the underlying note issuer.”
Summing up, Bamford says: “This investment will appeal to pension investors who are keen to gain exposure to UK equities without taking undue risk. The minimum £20,000 investment might be considered a little on the high side, although this is likely to be acceptable for a typical self-invested personal pension (Sipp) client.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good