The current economic environment is one of the most challenging ever seen and those who are feeling it most are savers and investors seeking an income from their capital. We take a look at one particular solution that is proving popular.
Fixed rates underperforming
With the Retail Price Index currently at 5% and the continued period of low interest rates and fiery stock market conditions, the ability to find an attractive income solution is a difficult one.
Fixed rate bonds offer a solution with a choice of terms available, normally ranging from 1 to 5 years in length. However, with rates currently in the 3.5% to 4.5% mark, even tying up your capital for longer is not providing a hedge against inflation. So savers and investors are faced with a tough decision, either lose money in a savings account or take more risk.
Potential income yield of 7.5%
This is where the potential to beat cash returns but with the safety net of capital protection could bridge the gap, and the Income Deposit Plan from Meteor provides a compelling alternative.
The plan protects your initial deposit while aiming to provide an annual income of 7.50%; this potential return is above the rate available on savings, and is competitive compared to the current yields on many investment funds.
As a six year plan, the Meteor structured deposit is a medium to long term option. During this time the plan will pay a 7.50% annual rate if the FTSE 100 closes each business day between 4,500 and 7,500 points. If during one year the FTSE 100 closes below 4,500 or above 7,500 then the income level will not be paid during that year.
Capital protection
As the plan is a structured deposit you will receive your initial deposit back in full after the six year term, regardless of what happens to the FTSE 100 Index, and as long as the deposit taker for the plan, Royal Bank of Scotland, is able to repay your money.
In the event that RBS is unable to meet its liabilities, the plan would come under the remit of the Financial Services Compensation Scheme deposit protection. This means savers could be eligible for compensation from the scheme for up to £85,000 per person if RBS wasn’t able to return the capital invested to savers.
Inflation beating
Head of savings and investments at Fair Investment Company Oliver Roylance-Smith said: “The income deposit plan from Meteor is one of the most competitive available for investors, offering the potential for a return over and above the rate of inflation.
“This potential return also sits alongside the capital protection offered by a structured deposit, allowing investors the opportunity for high returns with limited risk to their capital.”
The plan is open for direct investments, ISAs and ISA transfers.
Get more information about the Meteor FTSE Income Deposit Plan and apply here »
This is a structured deposit plan that is capital protected. 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 this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. 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.
© Fair Investment Company Ltd