Royal Bank of Scotland has introduced the guaranteed income and growth account, which is a combination of a high interest account and a guaranteed equity bond.
The company already offers the two elements separately as a guaranteed income account and a high interest stockmarket account but combined the two to give investors access to both income and growth within one product.
Investors with a lump sum of at least £5,000 must divide their investment equally between the two elements. The high interest account produces monthly income of 5.84 per cent over the three year term, while the guaranteed equity bond element returns 40 per cent of any growth in the FTSE 100 index over the same period. The original capital is fully guaranteed, so there is no risk to capital even if the FTSE 100 index falls over the term.
In some respects, the product is similar to Northern Rocks fifty-fifty, which combines a high interest account with a guaranteed equity term that is linked to the FTSE 100 index over a five-year term. Investors with fifty-fifty must also divide their original investment equally between the two elements and a full capital guarantee ensures there is no risk to capital if the index falls.
However, fifty-fifty provides investors with 70 per cent of any growth in the FTSE 100, over a longer period. Some investors may prefer this if they feel that 40 per cent cap on growth after three years is not a high enough return. However, the price of a full capital guarantee tends to be a cap on potential growth and this may put some investors off both products.
The FTSE 100 index fell from 6441.986 points on November 22, 1999 to 5345.940 points on November 22, 2001.