Britannia International has unveiled the second issue of the split deposit bond, a combination of a high interest account and a guaranteed equity bond.
The product is available to new investors with at least £10,000, while the minimum amount for existing customers is £5,000.
The high-interest account element pays 5 per cent gross for three years and withdrawals cannot be made during the fixed term. The guaranteed equity bond element is linked to the FTSE 100 index for five and a half years and offers 75 per cent of any growth in this index during the term.
To calculate the returns, the closing level of the FTSE 100 index is recorded on March 28, 2003 and this is compared with an average of the closing values taken during the last 12 months of the term. The original capital will be returned to investors whatever happens to the index.
This product is similar to Northern Rock Guernseys offshore fifty:fifty, which also combines a high-interest account with a FTSE 100-linked guaranteed equity bond. However, its high-interest account element is fixed at 8 per cent gross for one year, which is shorter than Britannia Internationals product. Some investors may prefer this because they are not locked in for three years if interest rates increase. Also, Northern Rock Guernseys guaranteed equity bond element offers lower potential growth of 70 per cent over a slightly shorter term of five years.
One consideration for investors choosing between the products is whether they would need to make emergency withdrawals. The Britannia International does not allow this, while Northern Rock Guernsey does, subject to a penalty of 90 days interest.