The plan is linked to the FTSE 100 index and full maturity is attained after six years. If at the end of each year the index level is the same or greater than at the start of the term, investors get 7 per cent growth based on one segment, 14 per cent on two segments, 21 per cent on three segments, 28 per cent on four segments, 35 per cent on five segments and 42 per cent on six segments. Any remaining segments will continue to their next potential early maturity points. If they never reach an early maturity point, the bond will mature in year six.
Investors will also get a full capital return on the segments which mature provided the index does not fall by at least 50 per cent without recovering to its initial level. Otherwise, investors will lose 1 per cent of their capital for every 1 per cent fall in the index. This means it is possible to have full capital return on the segments which have matured early, but if the index subsequently breaches the 50 per cent barrier without recovering, capital will be eroded on the remaining segments.
Early maturity features are not new, but the segmented approach offers a new twist on this approach. Although capital is at risk if the 50 per cent soft protection barrier fails, the segmented approach has the potential to soften the blow as it is possible that only some of the capital will be affected. However, these factors are index dependent and therefore uncertain.