Type: Guaranteed equity bond
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment: £10,000-£100,000, Isa £7,000
Term: Five years
Return: The greater of 10% of the original investment or 50% of the growth in the index at the end of the term
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: September 11, 2006, August 25, 2006 for Pep/Isa transfers
Commission: Initial 3%
Tel: 01727 734315
The NDF Secure Growth Plus Plan is a five-year FTSE 100-linked guaranteed equity bond providing a minimum return of 10 per cent of the original investment plus a full capital return.
Discussing the best features of the plan Baronworth director Colin Jackson says: “Returns are linked to one index only – the FTSE 100 – which is, in my view, favourable. In these uncertain times, any product that offers not only capital protection at maturity but also a minimum return has to be very attractive to those investors who are risk adverse.”
However he notes that the minimum return is quite low at 10 per cent but adds: “Of course, there is the potential for further returns via a 50 per cent market participation rate.”
The returns are subject to Capital Gains Tax, as opposed to income tax, which is one of Jackson’s favourite features. “ This means that anybody who has not used their CGT allowance can get the returns tax free, up to the limit, leaving their Isa allowance for something else.”
Casting an eye over the product literature Jackson says: “ As is to be expected with NDF, the product literature is attractively produced, well written and easy to understand.” He also feels the IFA commission, at 3 per cent, is in line with the market.
Considering the limitations of this product Jackson says: “This is a growth product only so is totally unsuitable for investors who are looking for income.”
In terms of the likely competition Jackson says there have been – and will continue to be – many products around that offer capital protection at maturity with returns based upon market participation. “I cannot, currently, locate any product that offers this plus a minimum return,” says Jackson.
Summing up Jackson says: “There are a number of plus factors in this product – linked to one index only, capital protection at maturity, a minimum return and subject to CGT as opposed to income tax. This product should be well received by those investors who are risk adverse but still looking for some exposure to the equity market.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good