Secured Capital Plan
Growth linked to the performance of the FTSE 100 index
Lump sum £5,000
Five years and 48 days
82.4% growth in the index
Original capital returned in full at end of term regardless of the performance of the index
October 25, 2004
Tel: 0800 333353
Standard Life has replaced its range of guaranteed bonds with the secured capital plan, a capital-protected Oeic established under the European Ucits III rules. The fund is linked to the FTSE 100 index for a term of five years and 48 days.
Aptitude Financial Planning principal Roy Rutter says: “The market for structured products is becoming very crowded and I am not convinced that this is the time for Standard Life to be entering the arena with an open-ended product.”
However, on a positive note, he likes the availability of partial encashment, although he points out that the capital protection will then be lost. He feels averaging at the start of the index and the link to a single index are good features. He continues: “It has a better level of protection than some of its competitors, it provides a good use of tax sheltering and interest is accrued on investors' money up to the start date. This is an alternative to the bonus allocations favoured by some competitors.”
On the down side Rutter dislikes what he regards as a high initial charge. He adds: “The reduction in yield over the term is probably no more than you would expect, but the 7.5 per cent initial charge will not go down well with investors.”
Casting an eye over the product literature Rutter complains that it is extensive and repetitive. “It is not particularly customer friendly, although with all the regulatory caveats now required, that is getting difficult,” he says.
Rutter also wonders why the participation rate is so precise at 82.4 per cent. He points out that the examples in the literature showing what investors might get back shows a 75 per cent participation rate, which Rutter finds confusing.
Rutter believes one or two of Keydata's offerings and guaranteed equity bonds from Bristol & West and National Savings & Investments will provide the main competition to Standard Life.
Summing up Rutter says: “There are some good features to this but the high initial charge and the lack of direction of the FTSE 100 will, I feel, inhibit the take-up.”
Suitability to market: Average
Investment strategy: Good
Adviser remuneration: Average