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Scottish Widows Follows European Model

Scottish Widows has taken inspiration from Italy and Spain by introducing the extra income and growth plan.

The plan has a term of three years and one month. It is similar to an investment trust in that it will buy shares in a Scottish Widows closed end fund — stockmarket growth 2 — which is registered in Dublin. Shares can be bought directly or through an Isa or pep transfer.

Abbey National has a similar product that is linked to the EuroStoxx 50. But returns of the Scottish Widows’ product will depend on a basket of 30 stocks from the FTSE 100 Index. These include well-known companies such as British Telecom, Reuters and Vodafone. This concept is popular in continental Europe.

The Scottish Widows plan has a choice of three income or growth options. Fixed annual income provides three annual payments of 10.25 per cent, fixed quarterly income provides 12 quarterly payments of 2.5 per cent and fixed growth offers a single payment of 33 per cent after three years.

The initial capital will be returned only if, by the end of the term, the stocks have not fallen by more than 20 per cent of their value at the start of the term. Even if one of the stocks falls by more than 20 per cent, it will eat into the investor’s capital.

The plan is most suitable for investors who may be seeking high income or growth, but who are prepared to take some risk with their capital.

According to Standard and Poor’s, Scottish Widows premier income is ranked 36 out of 73 funds based on an investment of £1,000 invested on a bid-to-bid basis with net income reinvested over one year to October 5, 2000.


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