With the deadline of 5th April 2012 close at hand, we have brought you our selection of the best investment plans currently available to help you decide which route to take.
These plans offer you a defined return for a defined level of risk, so you know the exact terms of the plan prior to investing and exactly what needs to happen in order to provide you with the stated income or fixed return.
Conditional capital protection
Unlike investment funds, where all of your capital moves on line with fluctuations in the market, these plans mostly contain what is known as conditional capital protection. This means that you will receive a return of your capital at the end of the investment term provided the value of the FTSE has not fallen by more than a specified amount, normally 50% of its starting value.
If it does fall by more than 50% during the investment term, the value of the capital returned will usually depend by how much the FTSE is below its starting value at the end of the investment term. However, some plans only measure the 50% reduction at the end of the plan rather than throughout the investment term.
Income – 7.7% yield (quarterly payments)
The FTSE Income Plan from Morgan Stanley pays a highly competitive fixed return of 7.7% per annum regardless of the performance of the FTSE and payments are made to you quarterly (equivalent to 1.925%).
The plan has a 5 year term and you will receive a full return of your original investment at the end unless the FTSE has fallen by more than 50% during the investment term. The minimum investment is £3,000 and the plan accepts applications for both tax years as well as ISA transfers and non-ISA investments.
Income – up to 7.5% yield (monthly payments)
Investec’s Bonus Income Plan offers a fixed return of 7% each year, regardless of the performance of the FTSE, with the potential for an additional 0.5% bonus for each year the FTSE finishes higher than its starting value. There is also a monthly option which pays 0.58% per month with the potential for an additional 0.04% bonus.
This plan also has a 5 year term and you will receive a full return of your original investment at the end unless the FTSE has fallen by more than 50% during the investment term. The minimum investment is £1,500 and the plan accepts applications for both tax years as well as ISA transfers and non-ISA investments.
Growth – potential 13% per year
Investec’s Enhanced Kick Out Plan offers a market-leading return of 13% for each year the investment has been in place, provided the value of the FTSE 100 at the end of the year is higher than its starting value (subject to averaging). The plan can mature early each year and if the plan does kick out, you also receive a return of your initial capital in full. If the plan does not mature, your initial capital will be returned in full unless the FTSE falls by more than 50% during the 5 year investment term.
Growth – potential return of 60% even if the FTSE falls
The Booster Plan from Morgan Stanley offers a defensive investment since it will return a fixed return of 60% even if the FTSE has gone down by up to 20%. The plan also contains a unique booster option which allows you to receive a positive return on your investment even if the FTSE falls by up to 50%.
Capital is at risk if the FTSE falls by more than 50% so this plan is an attractive option for those who are prepared to put their capital at risk in order to receive high returns but who also want to provide some protection against a falling market. The minimum investment is £3,000 and you can apply for both tax years at the same time as well as transfer existing ISAs and make non-ISA investments.
Growth – potential fixed return of 76%
The Geared Returns Plan from Investec Bank offers a fixed return of 76% provided the FTSE finishes higher than its starting value, subject to averaging. This means that the FTSE only has to go up by a small amount to provide a return equivalent to just over 15% per year (not compounded).
The plan includes conditional Capital protection, which means that your initial capital will be returned in full unless the FTSE falls by more than 50% during the investment term. You can also utilise your ISA allowance for both the current tax year and the next on a single application, as well as transfer existing ISAs and make non-ISA investments. The minimum investment is £1,500.
Important Reminder - why do an ISA?
The main reason for making sure you use your annual ISA allowance each year is the tax advantages, since no tax is payable on the income you receive on any capital gains that you make and there is no need to declare any ISA income or capital gains on your tax return. Investment ISAs therefore provide tax efficient income and growth, the value and benefit of which is compounded over time. Please note that tax treatment depends on your individual circumstances and may change.
Click here to compare our Investment ISA selections »
No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
These are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance. Tax treatment depends on your individual circumstances and may change.
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