Type: Capital-protected bond
Aim: Growth linked to performance of FTSE 100 index or FTSE 100 and Nikkei 225 indices
Minimum-maximum investment: £10,000-£1m, Isa £7,000
Term: Six years
Return: Option 1 – 11% in year one provided FTSE 100 is the same or higher than its initial value, 22% in year two, 33% in year three 44% in year four, 55% in year five, or 66% in year six, option 2 – 18% in year one provided FTSE 100 and Nikkei 225 are the same or higher than their initial values, 36% in year two, 54% in year three, 72% in year four, 90% in year five or 108% in year six
Guarantee: Original capital returned in full provided indices do not fall by more than 50 per cent without returning to at least their starting values at end of term
Closing date: February 20, 2008, February 6, 2008 for Pep/Isa transfers
Commission: Initial 3%
Tel: 01727 734315
This capital-protected bond is linked to the performance of the FTSE index or a combination of the FTSE 100 and Nikkei 225 indices over six years.
Lowes Financial Management managing director Ian Lowes observes that this is a variation of a structure that NDFA has issued on a regular basis for the past two years. “Previous issues have offered only one option linked to the FTSE 100 & Nikkei 225 indices, but this time a link to the FTSE 100 only has also been added. Clearly the pricing environment, which has steadily improved recently, has enabled it to offer the new option to complement the dual index version,” he says.
Lowes likes the product’s kick-out structure as he thinks it offers the potential for a very good return without the underlying index or indices having to grow by much at all. “In the current volatile market conditions this is particularly attractive. Both options have of 50 per cent downside protection, meaning that the underlying index or indices would need to halve before any money can be lost,” he says.
Current high volatility levels have enabled NDFA to offer the potential for an 11 per cent a year return under option one and 18 per cent a year under option two. “In respect of option one, these are the highest returns we have seen for this style of investment,” says Lowes.
According to Lowes, the potential returns are attractive for clients seeking a fixed level of growth potentially payable after only one year with the benefit of considerable protection against markets falling.
“The plan can be held within all the usual tax wrappers such as Isas, Pep transfers and pension. For direct investments, any growth received is subject to capital gains tax so will benefit from the recent reduction to 18 per cent,” says Lowes.
The literature receives praise from Lowes as he finds it clearly laid out with the benefits and risks clearly explained. Commission is standard for this type of plan.
“All charges are built into the terms of the plan so there are no explicit charges to pay. The implicit charges are no more than 6 per cent, which includes commission. For a six-year product, this represents very good value,” says Lowes.
He expects competition for this product to come from Barclays, which has a five-year FTSE 100-linked plan offering 10 per cent. Meteor, which has a dual linked plan using the FTSE and Eurostoxx 50 indices to provide returns of 16 per cent a year, is also seen as a competitor.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average