Nvesta's secure pension tracker plan is a capital-protected bond that is aimed at the occupational pensions and self-invested personal pensions markets.
The plan has a six-year term and is linked to the performance of the FTSE 100 index during that period. Pension trustees with a minimum of £20,000 to invest will get their original capital returned in full regardless of the performance of the index and will also get 110 per cent of any growth in the index during the term.
To calculate the returns, the closing level of the index is taken on April 30, 2004 and compared with the average closing levels of the index taken during the last six months of the term.
Although this plan is unique in that it is aimed exclusively at the pensions market, this does not mean it is the only product of its type that can be held within a pension. Keydata's dynamic growth plan, which is also a six-year FTSE 100-linked product, is being marketed to individual investors and pension trustees.
Unlike the Nvesta product, the Keydata plan has a choice of two investment options - one which offers full capital protection and another offering higher returns but with less capital protection. The advantage of this is that trustees can choose the level of risk and return that is right for them, but this also makes the product more complicated.
Keydata offers 150 per cent or 200 per cent of the growth in the index in excess of 10 per cent, but the snag is the initial 10 per cent growth in the index will not count. Some trustees and their advisers may think pensions are a complex area as it is, without having to explain the intricacies of Keydata's plan, so they may prefer Nvesta's relative simplicity.