Skipton Building Society has introduced a five-year guaranteed growth bond that is linked to three stockmarket indices.
The bond tracks the performance of the FTSE 100, S&P 500 and Eurostoxx 50 indices and guarantees the return of the original capital, plus a minimum return of 22 per cent. The maximum potential growth is 50 per cent.
The level of each index will be recorded at the start of the term and will be taken again each year during the term. If all three indices have increased compared to the previous year, investors will get a return of 8 per cent.
If all three indices do not rise during the term or they increase once or twice, investors will only get the minimum of 22 per cent growth plus their original capital. They will get growth of 24 per cent if the indices rise three times during the term and 32 per cent where the indices rise four times. If the indices rise every year, a 10 per cent bonus is added, bringing the maximum return up to 50 per cent.
This bond will suit investors who are looking for capital growth over the medium-term without putting their capital at risk. However, it is quite complicated and with global stockmarkets still at a relatively low level, investors risk missing out on higher returns when a recovery gathers pace. This could be a high price to pay for capital protection.