Type: Capital-protected bond
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: 5,000-1m
Term: Six years
Return: 7 per cent growth on one sixth of the original capital in year one provided index is the same or greater than the initial value,14% growth on two sixths of the capital in year two, 21% growth on half of the capital in year three, 28% growth on four sixths of the capital in year four, 35% growth on five sixths of the capital in year five or 42% growth on the original capital at the end of the term
Guarantee: Original capital returned in full provided index does not fall by at least 50 per cent without recovering to its initial value
Closing date: April 8, 2005, April 5, 2005 for Isas, March 24, 2005 for Pep/Isa transfers
Commission: Initial 3%
Tel: 01483 400400
Premiers segmented growth plan is a capital-protected bond which has the potential to produce growth of 7 per cent a year using a phased maturity feature.
Baronworth managing director Colin Jackson thinks investment products linked to an index are not as popular as they used to be and think makes it difficult for advisers to sell them. However, he adds that at least this product is linked to the investors favourite the FTSE 100.
“The headline rate of a potential 7 per cent a year growth is high enough to be attractive without going over the top. The 50 per cent safety net is probably what the clients would feel comfortable with,” he says.
Jackson feels the literature is relatively concise but he complains: “In the literature, the provider states that it believes growth is subject to capital gains tax. This is very different to saying growth is subject to capital gains tax and the uncertainty could cause problems for the advisor. If it turns out that instead of there being a capital gains tax liability there is an income tax liability, the client could try and establish a claim. We believe the literature should be definite on the subject.”
Discussing other drawbacks of the product Jackson concludes: “By its very nature there is no facility for income. Capital is not totally protected, which could be a turn-off for many clients, particularly those who have lost money on precipice bonds.”
Suitability to market: Poor
Investment strategy: Average
Adviser remuneration: Good