Type: Guaranteed equity bond
Aim: Income linked to the performance of the DJ Global Titans Index
Minimum-maximum investment: £5,000-£1m
Term: Six years
Return: 8% gross income at the end of year one, variable income in years two to six depending on the performance of the index
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: February 16, 2007, February 9, 2007 for Pep/Isa transfers
Commission: Initial 4%
Tel: 01483 306090
Premier’s global income plan is a guaranteed equity bond linked to the performance of the Dow Jones Global Titans index for six years. It provides an 8 per cent return in the first year, after which income is variable depending on the performance of the index.
Baronworth Investment Services director Colin Jackson believes Premier has adopted quite a novel approach in that the returns are not dependent on the index rising. “Even if the index falls, investors could possibly receive the returns. The headline rate of 8 per cent guaranteed at the end of the first year is very attractive and surely tempting to a would-be investor,” he says.
However, he highlights the fact that from year two onwards the returns could be considerably less or zero
“The capital protection is reassuring and is something that I like to see. Taking into account the type of product, the literature is well written and relatively easy to understand. Advisers are paid initial commission only – but at 4 per cent it is generous,” says Jackson.
Moving on to the less appealing aspects of the product Jackson says: “I particularly dislike anything dependent on the Dow Jones Global Titans 50 index. I do not like the uncertainty of the returns from this product in year two onwards. “
He also complains about the information on investors’ tax liabilities contained in the literature. “According to the literature, under the heading what is my tax liability, it states that Premier believes that the income is subject to income tax. Surely it should be definitive on this point, as whether the returns are subject to income tax or capital gains tax is crucial to any would-be investor,” he says.
As far as Jackson knows, there are no products available that will provide direct competition for this product.
He concludes: “In this day and age the product providers are looking for products that are a little different to run-of-the-mill that may be of interest to potential investors. However, I am not sure that this product would be of particular interest because of the link to the Dow Jones Global Titans Index 50 index and the fact that after year one there is no certainty of annual returns.”
Suitability to market: Poor
Investment strategy: Good
Adviser remuneration: Good