The regular fixed income plan April 08 allows investors to choose 8 per cent income a year or 0.65 per cent income a month. Where the annual income option is chosen, this will comprise five payments of 8 per cent and a final payment of 4 per cent.
Investors will also get their original capital back, provided the FTSE 100 index does not fall by more than 50 per cent during the term without recovering at maturity to at least its initial value. To calculate the return of capital, the closing level of the index is recorded on June 16, 2008 and compared with the closing level of the index on December 16, 2013. If the index falls below the 50 per cent safety net during the term and does not recover by the end, investors will lose 1 per cent of their original capital for every 1 per cent fall in the index.
According to the Structured Retail Products adviser website, there are only three other income plans available and these do not provide like-for-like comparisons. Two of these ¬ Keydata’s extra income plan and the Arc fixed income plan – are linked to the FTSE 100 and another index, while the Blue Sky protected income plan III is linked to a basket of financials stocks. The Keydata plan also has a shorter term of five years.
Investors who are looking at structured products for income may choose the NDFA plan due to its simplicity. Returns are linked to a single index that investors know well, with none of the potential problems that come with index baskets such as one index bringing down the returns of another during the averaging process.
NDFA’s plan does not swamp investors with too many options within the plan, which should make it relatively simple for advisers to explain.