Investors get a full capital return unless the FTSE 100 index falls by more than 50 per cent and does not recover to at least its initial value. It will mature early each year if the index has stayed the same as its initial value or has risen at that particular anniversary.
If the early maturity criteria is met in year one, investors will get a total return of 107 per cent, which consists of a full capital return and 7 per cent growth. In year two the return is 114 per cent, in year three 121 per cent, in year four 128 per cent, in year five 135 per cent and in year six 142 per cent.
If the index is never the same or greater than the initial value but does not breach the 50 per cent barrier investors will get only their original capital. However they will lose 1 per cent of their capital for every 1 per cent fall in the index if the 50 per cent barrier is breached.
This products use of an early maturity trigger every year reduces its chances of running full term, which also limits the likelihood of achieving the maximum growth on offer. However, early maturity could be useful for some investors who would like the opportunity for an early payout.
The main problem is a lack of certainty over when the term will end, so it would not be suitable for investors who need access to their money on a defined date. Also, the potential one for one reduction could result in capital erosion and some investors may feel the returns do not compensate for this risk.