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Product Matters

It is 10 years since Tessas were launched

and this year sees a huge opportunity for IFAs with £16bn of Tessa money maturing in the first six months.

In general, Tessas have been excellent investments although conventional variable-rate Tessas have returned less, as one would expect, than equity-linked equivalents.

Bristol & West and HSBC have been excellent exponents of the equity-linked advantage over the last five years. IFAs having used the HSBC Tessa Plus plans maturing this year will be able to demonstrate a 55 per cent total return so £9,000 will be producing £13,950.

Tessa holders have six months from maturity to consider their options, the case for investing original capital into a Tessa-only Isa, with its tax-free benefits is compelling while retaining the ability also to take out a conventional Isa.

Investors will consider the vast range of variable-rate Toisas in the marketplace. If accessibility to capital is not a factor, then fixed-rate alternatives would be preferable, with Julian Hodge, for example, offering 6.4 per cent annually on a five-year fixed basis.

If investors can accept a degree of risk to capital, then the new HSBC Performance Plus Isa, designed for Tessa rollovers, offers excellent opportunities. It has the potential for returns of up to 60 per cent linked to the performance of the FTSE 100 Index.

The worst-case scenario if the stockmarket falls over five years is that capital is returned intact. By linking to the most visible index and being based over five years, HSBC has dramatically lowered the risks to investors.

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