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Product Matters

The latest capital-protectedcomes from Clerical Medical in the shape of the secure investment plan. To all intents and purposes, it is an open-ended structured product with a five-and a-half-year term with the capital guarantee at maturity.

The plan has a participation rate of 110 per cent with 100 per cent capital protection and is linked to the FTSE 100. This is a reasonably attractive rate with protection at the moment and the 110 per cent growth makes up for the fact that no dividends are payable.

Perhaps of most interest is the way that returns will be calculated at the end of the term. Rather than basing the value of the investment on the closing price of the FTSE at the end of the term, Clerical intends to base final returns on the average return of the FTSE in the last six months of the term. This should protect any returns from a downward turn in the market on the final day.

What may also be attractive is the accessibility of client money but the 100 per cent capital guarantee will not apply.

Other notable differences are also worthy of mention. Since the product takes the structure of an Oeic, the plan will benefit from daily pricing. Investors are subject to CGT and not income tax and charges are explicit, unlike some structured products.

Those who want to invest before the plan is launched will get interest at 3 per cent.

I like many aspects of this plan but the capital guarantee and the growth calculation at the end of the investment term stand out. Too often, have we seen investors lose out at the last minute because of severe down turns.

Darius McDermott is managing director of Chelsea Financial Services

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