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Scottish Widows & Northern Rock offer combination bonds

Scottish Widows and Northern Rock are both offering combination products which consist of a guaranteed equity bond and a high interest account.

The Scottish Widows guaranteed investment combination consists of a six-year guaranteed investment bond, which is linked to the FTSE 100 index and a high interest account called the term deposit account. This has an interest rate of 7 per cent gross over 12 months.

Issue 12 of Northern Rock&#39s fifty:fifty product consists of a five-year guaranteed equity bond that is also linked to the FTSE 100, with a high-interest account that offers 7 per cent gross interest for two years.
Both products would suit cautious investors as both return investors&#39 capital in full at the end of the term, whatever happens to the FTSE 100 index.

Neither product allows investors to choose the investment split. The Northern Rock product splits capital equally between the two elements over five years, while the Scottish Widows product invests a higher amount &#4570 per cent of capital &#45 into the guaranteed equity bond element for one extra year. It may be more suitable to equity-minded investors with a longer-term view.

The calculation of returns on the guaranteed equity bond elements also differ. Scottish Widows measures the performance of the FTSE 100 every six months during the term, capping any rise or fall at 8 per cent.

The Northern Rock product compares the average level of the FTSE 100 during the final year with its closing level at the start of the term. Unlike the Scottish Widows product, it protects investors from stockmarket slides during the middle of the term, but will not capture the highs during this period.

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