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Product matters Nigel Callaghan

Standard Life’s launch of a structured product – capital guaranteed plus – exclusively within its Sipp wrapper offers the safety net of a guaranteed minimum return together with exposure to equities.

There are two fixed-term versions linked to the FTSE 100 – one year with 100 per cent participation rate with any growth capped to 10 per cent and a two-year option with 110 per cent partici-pation rate, with returns limited to 20 per cent.

This is a tranche product, with a strike date of October 27. Funds before this date will be placed on deposit at 1 per cent beneath base rate. Investors will normally be unable to access any of this investment during the term.

Does this represent value? After the deduction of, say, 3 per cent initial and 0.5 per cent trail commission, the effective return for the one- year deal will be 6.5 per cent, at best. Other options may be more attractive. Today’s best instant access bank account is offering 6 per cent annual return while the top one-year fixed bank account is offering 7.2 per cent.

From an equity perspective, this fund also has limitations. It is linked to the FTSE 100 but offers no access to its sizeable average annual dividend yield of 4.2 per cent. The latest Barclays equity gilt survey shows that the UK equity markets have exceeded 10 per cent 14 times out of the last 20 years. The fund’s caps look penal.

Investors may prefer to invest in a cash fund that would provide similar guarantees and potentially better returns or to take a longer-term outlook and invest in real assets.

Nigel Callaghan is pensions analyst at Hargreaves Lansdown

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