Scottish Mutual has introduced its income and growth plan, which is available as an individual savings account or as a direct investment.
Investors have three options annual income of 10 per cent, quarterly income of 2.4 per cent or a growth option of 31 per cent payable after three years and two months.
The plan buys shares in Census Investments 24, a Dublin-based closed ended investment company. In turn, it invests in 32 blue chip stocks from the FTSE 100 index, including HSBC, Reuters, British Telecom and Sainsbury's. The stocks cover a range of sectors including the media. food retailing, telecommunications, financial services and pharmaceuticals.
The level of the stocks are recorded at the start of the term and again at the end. As a safety feature, the two worst performing stocks are not included when calculating the final returns. The final level of the remaining 30 stocks must be no more than 20 per cent lower than the starting level for investors to get their original capital back.
If any stock falls by more than 20 per cent, capital is reduced on a sliding scale up to 1/30th for each stock.
The plan could suit investors who are looking for income or growth with some degree of capital protection, but they must realise that poor performance of just a few stocks could put their original capital at risk.