View more on these topics

Woolwich races against FTSE

Woolwich Plan Managers has established another issue of the accelerated growth plan, a capital protected bond that provides geared returns linked to the FTSE 100 index over a six-year term.

The plan will provide 700 per cent growth in the index, capped at 70 per cent. This means investors will benefit fully from the geared returns if the index rises by up to 10 per cent. If it rises by more than 10 per cent investors will get the maximum return available under the plan but the full amount of growth will not be passed on. For example, if the index rises by 7 per cent by the end of year six, investors will get seven times this amount &#45 49 per cent growth. However, if the index rises by 20 per cent by the end of year six, investors will get the maximum return of 70 per cent growth.

Investors will also receive a full capital return unless the FTSE 100 index falls by more than 50 per cent and fails to recover to at least its value at the start of the term. If this safety net fails, the original capital will be reduced by 1 per cent for every 1 per cent fall in the index.

The most appealing feature of this product is that returns will be boosted if the index rises by a modest amount &#45 which is arguably when investors will most need it. However, the presence of a 70 per cent cap will act as a constraint if the index grows above 10 per cent. This is the price investors pay for the potential of geared returns and some degree of capital protection.

Although full capital protection is not on offer, the index would need to fall by half its starting value for investors to start losing their original capital which appears unlikely, although not impossible.

Recommended

Insinger in multi-manager index call

Investment bank and multi-manager Insinger de Beaufort has called for multi-manager performance to be measured by its own index so that funds of funds can be truly compared. Speaking at the Sway conference in Monte Carlo last week, director Peter Fitzgerald said IFAs are subjected to undue risk and are unable to make inf-ormed decisions […]

Anger grows as providers stand firm on levy aid

Anger is mounting among over the end of the product provider subsidy of the Financial Services Compensation Scheme levy through Pass. It was recently revealed that providers are unlikely to continue the subsidy at the close of this year but IFAs say it should continue as it is the providers&#39 products which cause compensation claims. […]

Heir today

Do individuals do enough to protect themselves against inheritance tax? Are intermediaries doing enough to encourage them to do so and what are the best options? Bennett: Market statistics have shown the number of people leaving an estate which qualifies for inheritance tax has risen by fivefold over the past two years to around two […]

Abacus urges brokers to act now on M-Day

Specialist branded lender Abacus Permanent is contacting around 10,000 brokers to urge them to start compliant processing now to reduce delays after M-Day. Abacus, formed in 2002 by Mortgage 2000 directors, says brokers should start entering all additional compliance information wherever possible. Head of sales Marc Tur-ner Turner says: “It is imp-ortant that brokers are […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment