GE Life has introduced the balanced income and growth plan, the latest in its series of guaranteed equity bonds.
Clients can choose to take either a guaranteed annual income of 8 per cent or monthly income of 0.64 per cent for the five years of the term of the bond. Alternatively, they can choose the growth option which promises 50 per cent growth in the original capital at the end of the term.
The bond will track the Dow Jones Euro Stoxx 50 index, which covers 50 established companies in the Eurozone. Some of the companies in the index include Unilever, Nokia and Philips Electronics. The Dow Jones Eurostoxx 50 index went from 1,724.98 points on November 6, 1996 to 3,611 points on November 6, 2001.
The return of the investors original capital depends on the performance of the index. If it falls by between 30 and 40 per cent during the term and the final level is lower than the initial level, the original capital will be decrease by 1 per cent for each 1 per cent fall in the index. If the index falls by more than 40 per cent, the capital will go down by 2 per cent for each 1 per cent fall.
GE Lifes balanced income and growth plan is similar to the NDF extra income and growth plan. The NDF plan also offers income and growth by investing in the Dow Jones Eurostoxx 50 index. However, the NDF plan only invests for three years, compared to the five years of the GE Life plan. The original capital of the NDF plan starts to drop if the index falls by 20 per cent over the term and ends below its initial level. The GE Life product sees capital erode only after a 30 to 40 per cent fall, making it more secure.