Top 10 reasons to consider Kick Out plans Go compare with our comparison table

Top 10 reasons to consider Kick Out plans

07 February 2012 / by Oliver Roylance-Smith

With the interest in Kick Out plans continuing to rise and the current market offering some of the highest rates ever from this type of investment, we give you 10 reasons which help to explain why Kick Outs are proving so popular with investors.

1.    Defined returns v defined risk

The investor has the benefit of knowing at outset the conditions that need to be met in order to provide the stated returns, thus providing a defined return for a defined amount of risk that can be easily compared with alternative investments.

2.    FTSE linked

Plans linked to the FTSE 100 Index provide a return against what is widely recognised as the proxy benchmark for most investment managers. The historical volatility is also familiar to many investors.

3.    Potential to beat the market

Most Kick Out plans will mature early if the level of the FTSE at the end of the year is higher than its starting value (sometimes subject to averaging). This means that even if the FTSE has only gone up by a small amount, you would still receive the full growth rate, and with many currently offering double digit returns this will be far higher than the market.

4.    No hidden charges

With Kick Out plans all of the charges are taken into account in the headline return so there are no hidden surprises. This should be compared to a typical UK equity fund which will often have an initial charge of up to 5.5% and total annual charges of 1.66% (source: Morningstar).

5.    A cost-effective option

The costs associated with the management of funds apply each and every year (in both actively managed and tracker funds) which helps to explain the number of funds which fail to outperform the FTSE, especially over a five year period. Such ongoing costs do not apply to Kick Out plans since all charges are included in the headline rate of return.

6.    A disciplined approach

The mechanics of the plan removes the need for the investor to worry about when to come out of the market since the decision is made for them by the pre-determined investment terms and future market conditions. When the plan matures, the investor then has the opportunity to reassess their options.

7.    Conditional protection

Your original capital is returned if the plan kicks out but should this not occur, capital will typically only be returned provided the FTSE has not fallen below 50% of the starting level of the index. To put this into context, if the starting level of the FTSE is 6,000, it would have to fall to 3,000 before your capital would be at risk, a level not seen since early 1995 although we must remember that past performance of the index is not a guide to future performance.

8.    Capital protection options

This type of plan is also available with full capital protection, known as structured deposit plans. These offer the potential for returns which are higher than those currently available from the more traditional fixed rate bond, as well as Financial Services Compensation Scheme eligibility.

9.    Tax efficient - ISA friendly

All of the Kick Out plans detailed by us on fairinvestment.co.uk are available for individuals to use their annual stocks and shares ISA allowance and will also accept investment ISA transfers. For the current tax year the annual allowance is £10,680 which will be increasing by £600 to £11,280 from 6th April 2012.

10.    Current market offering

The market currently has on offer some of the highest levels of potential return for this type of product from a number of different providers, allowing the investor plenty of choice.

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No news, feature, article or comment should be seen as a personal recommendation to invest.

Tax legislation is subject to change at any time.

Different types of investment carry different levels of risk and may not be suitable for all investors. Some structured investment plans are not capital protected and there may be the risk of losing some or all of your initial investment. There is also 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 which case you may not be entitled to compensation from the Financial Services Compensation Scheme (FSCS). In addition, you may not get back the full amount invested 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.

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.


© Fair Investment Company Limited

ProviderPlan NameMaximum Potential Return*TermMore Info
FTSE 100 Enhanced Kick Out Plan

10%

per annum

Up to
6 years
More Info >
Structured investment plan with the potential to mature after years 1, 2, 3, 4, 5 or 6. If the plan matures early it will return 10% times the number of years the plan has been in force. Also available for Stocks & Shares ISA and ISA transfer.
Kick Out Deposit Plan

3%

per annum

Up to
6 years
More Info >
Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 3% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer.
* Maximum Growth Yields are not guaranteed and subject to certain conditions

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.