Royal London invites investors to “enjoy the life of Riley” with its new Riley investment bond. Investors can choose between a FTSE 350 tracker fund and an active FTSE 350 fund managed by Schroders and then protect up to 110 per cent of their initial investment at a specified date in future.The product appears to be pitched at disillusioned with-profits investors – certainly a big potential market. The concept is good and Royal London seems to have made a pretty good stab at creating a straightforward, transparent product. However, based on the examples given in the product literature, the cost of protection, provided via Goldman Sachs, appears prohibitive. Royal London’s examples suggest that providing 100 per cent capital protection over 10 years would cost a whopping 15 per cent, meaning a 10,000 investment would be reduced to just 8,500 at day one. If you factor in the lost potential growth on this protection money (at 6 per cent a year) the true opportunity cost could be more than a quarter of the initial investment over 10 years. On a wider note, I also have concerns over the extent to which invest- ment bonds are sold to individuals where using capital gains-taxable investments would be more tax-efficient as gains can be offset against the annual CGT allowance. The high initial commission paid on bonds causes some advisers to overlook this aspect. Royal London deserves credit for innovation but in practice I just cannot see the point of the Riley bond. Why pay an arm and a leg for protection when the chances of losing money in a well-diversified portfolio over 10 years are slim and the upside probably higher?
Clients left holding dog funds have every reason to feel shortchanged
An ‘under the radar’ lobbying campaign headed by retail and hospitality firms could harm the pensions of one in six workers, warns the Trade Union Congress.The TUC says it has learnt major employers are lobbying ministers to introduce a waiting period of one year before employees in a new job gain compulsory employer contributions to […]
Treasury economic secretary Ed Balls has attacked Stephen Byers’ call for inheritance tax to be scrapped as part of a co-ordinated Treasury offensive against the leading Blairite. Speaking on BBC Radio 4’s Today Programme, Balls said Byers’ proposal was unfunded and uncosted and labelled it a “short-term sectional gesture”. The move comes in conjunction with […]
With September upon us and the holiday season drawing to a close, it makes sense to endeavour to determine what investment themes might take us into the autumn.
‘Work like a dog day’ recognises the hardest-working people. On this day, employers show their appreciation for all of their employees who carry the heaviest workloads.
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