Scottish Life International has introduced the third series of its income and growth bonus bond.
The bond is linked to the performance of three indices – the FTSE 100, the S&P 500 and the EuroStoxx 50. It has a choice of two income and growth options. Investors can choose to receive 10.3 per cent annual gross income, 2.25 per cent quarterly or a growth option of 33.25 per cent after the three year term.
The final capital return will depend on the stockmarket with the lowest level at the end of the term. Investors will get all their original capital back as long as the indices do not fall below their starting levels. If they do fall, the return will be based on the lowest index. Falls greater than 30 per cent will mean investors lose 1 per cent of their capital for every 1 per cent fall in the index.
The bond is a reasonable product for investors who are prepared to risk losing part of their capital in pursuit of higher income. But the drawback is that only one of the indices need to fall for investors to experience capital erosion.
According to FTSE, the closing level of the FTSE 100 was 5227.288 on October 10, 1997 compared to 6247.680 on October 10, 2000.