Type: Income bond
Aim: Income or growth by investing in cash and insurance contracts
Minimum-maximum investment: 4,000-no maximum, Isa 7,000
Term; Five years
Return: 7.5% income a year, 1.875% income a quarter or 43.5% growth over five years
Guarantee: Original capital returned in full unless insurance companies default or the maturity rates of the insurance contract change
Closing date: December 23, 2005, December 9, 2005 for Pep/Isa transfers
Commission: Initial 3%, renewal 0.5%
Tel: 020 7710 6906
Keydatas secure income bond 3 is an income bond which provides income or growth by investing in cash and insurance contracts.
Looking at the market suitability of the product Aptitude Financial Management principal Roy Rutter says: With a view that interest rate movement next time could be down rather than up the timing is good. This product falls really between the stockmarket-linked structured products, of which I am not an enthusiast, and the security of a deposit-type fixed-interest account.
Useful features Rutter highlights include a choice of quarterly or annual income, availability to Pep transfers and the fact that it can be placed in a Sipp which he views as very timely.
Casting an eye over the product literature Rutter says: It is clear, compact and well presented with the boring bits at the back. Adviser remuneration is as expected – its nice to see the 0.5 per cent renewal commission is still on offer.
Moving onto the negative features of the product Rutter believes the concept of maturing insurance contracts needs explaining to clients, lest the dreaded word endowment comes into their thinking. He says: Overall the bond passes most of the right buttons. But the withdrawal penalties and early exit penalties are fairly severe, although to be expected perhaps.
He also has a minor complaint about the closing date. Lets hope IFAs get applications in early and the Royal Mail delkicvers ot the closing date is in the thick of the Christmas post.
Rutter feels there are no direct competitors to this product. I see this as falling between fixed interest bonds from providers such as Heritable Bank and Birmingham Midshires, and structured products.
Summing up Rutter says: This bond has come into the market at the right time and the Keydata name is becoming better known to IFAs, if not to clients. However, with very recent memories of Equitable LIfe and closed funds, there may be reservations in some quarters about an insurance contract linked bond.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good