View more on these topics

Timing right for Morgan Stanley inflation-linked plan

Morgan Stanley IQ – UK Inflation-Linked Income Plan 2

Type: Capital-protected bond

Aim: Income linked to inflation through the UK Retail Price index and the return of capital linked to the performance of the FTSE 100 index

Minimum-maximum investment: £3,000-no maximum, Isa £10,680

Term: Five years

Return: 5.25% income at the end of year one, 1.5 times the annual increase in the UK Retail Price index

Protection: Original capital returned in full at the end of the term provided the index does not fall by 50% or more by the final day of the term

Closing date: August 24, 2011, August 17, 2011 for Isa transfers

Commission: Initial 3%

Tel: 020 7425 9000

This five-year structured product from Morgan Stanley IQ provides income linked to inflation through the UK Retail Price index, while the return of capital depends on the performance of the FTSE 100 index.

Putting the product in to its market context, Baronworth Investment Services director Colin Jackson says: “Inflation is a topic that is regularly in the news so Morgan Stanley coming up with the inflation linked income plan is an excellent piece of marketing – or simply good fortune.

“As is to be expected with Morgan Stanley, the literature is well presented, easy to understand and user friendly.”

Jackson points out that investors’ funds are invested in to securities issued by Morgan Stanley International which are rated A+ by Standard & Poor’s.  He adds that In addition to direct investments, the product accepts investments into an Isa wrapper and Isa transfers.

“Return of capital is linked to the FTSE 100 index. The initial capital is paid in full on maturity provided the Index is above 50 per cent of its level on the start date of the plan.  The European capital protection barrier is utilised, which is more favourable to investors as it does not matter if the Index falls by 50 per cent or more during the term of the plan.  It is where it stands at the end that counts.”

Jackson feels that commission of 3 per cent is in line with the market.

Turning to the potential drawbacks of the plan Jackson says: “At the end of the first year investors receive a fixed income payment of 5.25 per cent, which is on the low side.  Annual income payments thereafter will be equal to 1.5 times the annual increase in the UK Retail Price index – the inflation rate.

“As the Government will do everything in its power to bring inflation down, there is a reasonable chance that the level of income will be lower than anticipated.  Furthermore, if the year-on-year change in the UK RPI is zero or negative, no income will be paid for that year.”

Discussing products which could provide the main competition, Jackson says: “I cannot, currently, locate any products where the level of income is linked to the UK Retail Price index.”

BROKER RATINGS 

Suitability to market – Average

Investment strategy – Average

Adviser remuneration – Good

 Overall 6/10

Recommended

Premier fund shows income success

Premier Asset Management says its multi-asset distribution fund is performing well for income investors at a time when inflation is a concern. The firm says anyone who bought the fund for income has seen impressive results even taking the financial crisis into account. Its multi-asset approach provides multiple sources of income, enabling the fund to […]

Barclays profits fall 33 per cent due to PPI payouts

Barclays profits fell 33 per cent in the first half of 2011 to £2.6bn compared to £3.9bn in the same period in 2010. This includes the £1bn set aside for settling payment protection insurance complaints. In June, Barclays promised to pay compensation to all its PPI customers who made a complaint before April 20. The […]

Lansley airs concerns on NHS pension moves

Health Secretary Andrew Lansley has attacked the Government’s public sector pension reform proposals in a letter to Treasury chief secretary Danny Alexander. A private letter to Alexander, leaked to the Telegraph and reportedly sent to the Lib Dem MP two months ago, refers to a paper sent to the Cabinet outlining the Government’s plans. Under […]

1

Santander’s gross mortgage lending down 21%

Santander’s gross mortgage lending in the first half of the year was 21 per cent lower than the same period in 2010. The Spanish bank lent £9.7bn in the UK in the first half of the year, down from £12.3bn in the first six months of 2010. This drop in lending meant its share of […]

Choose life…

Sarah Scott  – Marketing Consultant, Royal London  This month sees the return of Renton, Sickboy, Begbie and Spud in the sequel to the film Trainspotting. Just over 20 years later, we return to see exactly how life treated the characters whose lifestyle was less than ideal back in 1996. Did they choose a job, choose […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment