Schroders has brought in the income Isa, an individual savings account that invests in a recently introduced Schroder investment trust.
The Isa aims to provide a tax-free income of 5.8 per cent a year and the potential for capital growth by investing in the ordinary shares of the Schroder split investment fund.
This investment trust invests 75 per cent in a portfolio of stocks listed on the FTSE 350 index. The remaining 25 per cent goes into a portfolio of fixed interest securities through the Schroder monthly high income and Schroder corporate bond unit trusts.
Gearing is limited to 15 per cent so it is not as risky as highly geared split-capital trusts like BFS geared income. Investing in the UK market may be an attractive feature for some investors as it has held up quite well over the last few weeks but stocks with good growth potential may still be picked up cheaply.
It is likely to appeal to adventurous income seekers since more cautious investors are likely to go for products like with-profits bonds. But some investors may be looking for a higher level of income than this Isa offers.
According to Standard & Poor's the Schroder corporate bond fund is ranked 17 out of 74 funds and the Schroder monthly high income fund is ranked 15 out of 30 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to December 10, 2001.