The British summer officially started on 21st June 2013, so as we approach the two thirds mark we take at look at what has already been a competitive range of income and growth investment opportunities, to bring you our Top 10 best selling investments this summer.
As you might expect with all of the problems facing fixed rate savers, who inevitably look to take on more risk in the hunt for higher returns, income features heavily towards the top of the list. However, there are also some compelling growth stories including defensive strategies around the FTSE, investing in the top 3 largest companies in the UK or perhaps having any future growth linked to the most successful of the 20 largest UK listed companies.
Defined returns and defined risk
All of the investments listed in our Top 10 offer you a defined return for a defined level of risk, which means that 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
These investment also include conditional capital protection which means that your initial investment is returned at the end of the investment term unless the FTSE 100 Index falls by more than a specified amount (normally 50%), measured either throughout the term of the plan or at the end of the investment only. If it does fall by more than this amount then 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. This is unlike investment funds where all of your capital moves in line with fluctuations in the market on a daily basis.
No 1 – Investec Enhanced Income Plan
Investec hold top slot with their increasingly popular fixed income plan. The 5.76% fixed annual income is over double the returns currently available from leading fixed rate bonds and attractive when compared to the variable yields available from investments funds, so it is perhaps easy to understand its top position. The income is fixed and so is not dependent on the performance of the FTSE and is also paid out each month (at 0.48% per month).
Your capital is at risk if the FTSE 100 falls by more than 50% of its starting value during the investment term. If it does, and the Index also finishes below its starting level then your original capital will be reduced by 1% for each 1% fall. Click here for more information about the Investec Enhanced Income Plan »
No 2 – Morgan Stanley Income Accumulator Plan
Another income plan makes it into our number 2 position which has been popular for those who think the FTSE could remain above 4,500 points for most or all of the next six years. The investment offers up to 7% each year with income being accrued for each week the FTSE 100 closes between 4,500 and 9,000 points - if it closes outside of this range, no income will be added for that week. All accrued income is then paid out to you each quarter.
Your initial capital is returned in full unless the value of the Index on the final day of your investment is below 4,000 points. If the Index is lower, your initial investment will be reduced by 1% for each 1% fall. Click here for more information about the Morgan Stanley Income Accumulator Plan »
No 3 – Investec Defined Returns Plan
With the FTSE continuing at historically high levels, this plan offers two opportunities to provide highly attractive returns, even if the Index only rises by a small amount. The investment returns either 40.5% after 3 years or 67.5% after 5 years, provided the level of the FTSE is higher than its starting value at either point (subject to averaging). These fixed returns are equivalent to compound annual growth rates of around 12% at year 3 and 10.85% at year 5.
In return for the opportunity for such high returns, your capital is at risk if the FTSE falls by more than 50% during the investment term and also finishes below its starting level, in which case your initial investment will be reduced by 1% for each 1% fall. Click here for more information about the Investec Defined Returns Plan »
No 4 – Investec Enhanced Kick Out Plan
Kick out plans have been the real investment story of the last couple of years with their ability to mature early each year, normally from year one or two onwards depending on the plan. However, with the increasing need for income from both savers and investors our first kick out plan features in fourth place.
Should the value of the FTSE at the end of years 1 to 6 be higher than its value at the start of the plan (subject to averaging), you will receive 7.75% for each year it has been in place (not compounded). Again, this investment could be for those who are finding it difficult to decide whether now is a good time to invest in the UK stock market since although the FTSE does have to go up in order to provide a return, this can be by just one point. It also offers the potential for high returns from as early as 12 months.
Your capital is at risk if the FTSE falls by more than 50% during the 6 year investment term and finishes below its starting value, in which case it will be reduced by 1% for each 1% fall. Click here for more information about the Investec Enhanced Kick Out Plan »
No 5 – Start Point (BNP Paribas) Top 3 Autocall Plan
The current crop of kick out plans (technically known as ‘autocalls’) is an area where there is strength in depth both in the number of providers offering plans, as well as the range of offerings catering for a wide variety of investment views and needs. Start Point is the trading name for a range of investments from BNP Paribas, the fourth largest bank in Europe and this is one of their two kick out entries in our Top 10.
The investment is targeted at those who think the stock market may stay flat or go up since it links your return to the performance of three FTSE 100 companies (HSBC, BP and Vodafone) and should the value of all three shares at the end of any year finish at or above their levels at the start of your investment, the plan will end and you will receive 12% for each year invested (not compounded).
The return of your initial investment is dependent on the FTSE 100 Index not falling by more than 50% of its value at the start of the plan. If it does then your capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment. Click here for more information about the Start Point Top 3 Autocall Plan »
No 6 – Morgan Stanley Defensive Kick Out Plan
The seemingly increased uncertainty around what will happen to the FTSE in the coming years has also provoked a rise in the popularity of defensive versions of this type of investment which get their name from the fact that they will kick out even if the FTSE falls below its starting value.
The second entrant from the global investment bank and asset manager is aimed at those investors who would prefer to have some protection against a slightly falling market. The plan offers a competitive annual return of 9% (not compounded) provided the FTSE at the end of each year (from year 2 onwards) is no more than 5% below its value at the start of the plan.
The plan’s conditional capital protection means that your initial investment is returned in full unless the FTSE 100 falls by more than 50% during the term and is also below 95% of its starting value at the end of the 6 years. In this case your initial capital will be reduced by the same amount as the fall in the Index. Click here for more information about the Morgan Stanley Defensive Kick Out Plan »
No 7 – Legal & General Early Bonus Plan
The Early Bonus Plan from Legal & General is their only entry in our Top 10 and is another investment with a term of up to six years - it will return 8.4% for each year invested (not compounded) if at the end of year 2, year 4 or the final year the value of the FTSE is higher than its value at the start of the investment. There is also a more defensive option available where the value of the FTSE must not have fallen by more than 10% to produce a return but this offers a lower potential growth rate of 6.05%.
Capital is at risk with both investments if the level of the FTSE is more than 50% below its value at the start of the plan, measured at the end of the six year term only, in which case your initial capital is reduced by the same percentage as the fall in the Index. Click here for more information about the Legal & General Early Bonus Plan »
No 8 – Gilliat Enhanced Income Builder
Gilliat’s sole entrant in our Top 10 is their Enhanced Income Builder which is designed to provide a competitive level of income dependent on the FTSE remaining within a defined range. The investment offers up to 8% each year with income accruing for each week the FTSE 100 remains above 3,900 points – it is then paid out to you each quarter.
Your capital is at risk if the value of the FTSE on the last day of the investment is below the same 3,900 point barrier, in which case your initial capital will be reduced by the equivalent drop in the Index. Click here for more information about the Gilliat Enhanced Income Builder »
No 9 – Start Point Step Down Autocall Plan
The second entry from Start Point (BNP Paribas) is their Step Down Autocall which is another ‘defensive’ investment, designed for those who think the stock market may stay the same or go down. The investment provides 6.5% per year (not compounded) provided the Index at the end of year 2 onwards is higher than a particular level. This level starts at 100% of the plan’s starting value and then ‘steps down’ by 3% each year from the second year onwards and ending with a larger drop to 80% in the final year.
Your capital is at risk if the FSTE falls by more than 50% of its starting value during the investment term and also finishes lower than 80% of its starting value. If this is the case, your initial investment will be reduced by the same percentage as the fall in the FTSE. Click here for more information about the Start Point Step Down Autocall Plan »
No 10 – Morgan Stanley UK Giants Selector Plan
Our final spot is taken by another investment from Morgan Stanley and is targeted at those who would prefer to invest in only the largest UK companies. The UK Giants are the 20 largest companies* in the UK as at 2nd July 2013 and the investment return you receive is based on the top 11 best-performing shares in these companies. If this return is negative at the end of the term, you will not receive a growth payment.
The return of your initial investment is dependent on the performance of the FTSE 100 Index and offers some protection from a falling market since it will be returned in full unless the Index has fallen by 45% or more on the final day of the investment - if it has, your capital will be reduced by 1% for each 1% fall. Click here for more information about the Morgan Stanley UK Giants Selector Plan »
Low minimums and ISA friendly
Most of the above plans have low minimum investments, starting from £3,000. All Investec, Morgan Stanley and Legal & General plans have a minimum investment of £3,000 while the Start Point investments have a slightly higher minimum at £5,000 and the Gilliat Enhanced Income Builder is £10,000.
All ten investments are eligible for new investment ISAs (the ISA allowance for the current 2013/14 tax year is £11,520) and accept both Cash ISA and Investment ISA transfers. Please note that if you transfer a Cash ISA into an Investment ISA you cannot then move it back into a Cash ISA. The tax treatment depends on legislation and your individual circumstances which may change in the future.
How to apply – don’t miss the deadline...
When you click for more information on any of the above plans you will be able to request a brochure pack which will be sent to you by post and email. All of the above investments are only available for a set offer period with deadlines for ISA transfers as well as new application deadlines, although many of them will release a new issue shortly afterwards.
We will need to receive your application one day before any deadline so if time is short and you wish to apply, we recommend that you print and complete the application form contained within the email brochure pack attachments. If you have any questions on how to apply or any questions on how an investment works, please contact our Customer Services team on 0845 308 2525.
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* Top 20 by market capitalization. Although these companies remain in the basket even if they cease to one of the largest 20, there are a limited number of corporate actions which could affect the constituents of the basket – please refer to the brochure for further information.
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. Before transferring an ISA please check there are no penalties for withdrawal from your existing ISA provider.
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 or any shares listed in the Index is not a guide to their future performance.
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