Yorkshire Banks guaranteed equity bond is aimed at people who want to invest in the stockmarket but who have been put off by the market volatility that has taken place over the past year.
The product will invest in the FTSE 100 index for a five-year period, with investors guaranteed to bet back at least 110 of their original investment. Yorkshire Bank has structured the product so investors can get up to 70 per cent of any growth in the FTSE 100 over the term of the bond.
Yorkshire Bank will protect the original capital by buying a series of corporate bonds with it. These bonds will be provided by banks in the UK that have a credit rating of A or AA, making them financially stable. To protect against any sudden falls in the value of the FTSE the final level of the index at the end of the five-year period will be taken by averaging out the level of the index over the past year.
The Yorkshire Bank product is similar in structure to the five-year guaranteed growth bond from Skipton Guernsey, which also invests in the FTSE 100 index over a five-year period. Both products have different benefits when compared. The Yorkshire Bank product allows access to up to 70 per cent of any growth in the index, compared to 50 per cent growth from the Skipton Guernsey bond. However, 126 per cent of any original capital invested in the Skipton Guernsey bond is protected, compared to 110 per cent of the Yorkshire Bank bond.