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Product matters

I believe that the NDF growth kickout plan, which was launched in September, offers a potentially very attractive return of 11 per cent a year.

As is to be expected with NDF, the literature is very well produced and easy to understand, notwithstanding the complexity of the product.

On the upside, all returns are subject to capital gains tax, as opposed to income tax, which means that investors who do not utilise their capital gains tax allowance can receive all or part of the return tax-free and use their Isa allowance for something else. On the downside, there is limited capital protection. If the 50 per cent protection barrier is breached, there will be capital loss on a 1:1 basis. Furthermore, return of capital is linked to two indices – the FTSE 100 and the Nikkei 225. As return of capital is linked to the worst-performing index, this adds significantly to the risk.

Adviser remuneration of 3 per cent is in line with the market although some providers are now paying trail commission, for example, Keydata.

Although the headline rate is a real eye-catcher, we are not particularly keen on the product as if the 50 per cent protection barrier is breached, capital is not protected and return of capital is linked to the worst-performing index.

Colin Jackson is a director at Baronworth

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