View more on these topics

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

Recommended

United stand

As we hear more and more diverse opinions about the FSA’s recent RDR interim report, I cannot help but feel that the industry is getting further away from a workable solution to our own domestic problems.

Rescue package misses target

The mortgage industry says the Government’s £1bn rescue package and stamp duty holiday do not go far enough as they fail to address the liquidity problems.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com