Last Minute ISA – Investment ISAs
With just a week to go until the deadline for using your 2014/15 Investment ISA allowance (£15,000), this is your last opportunity to protect your returns from the taxman. If you are yet to make use of this valuable tax break, we let you know where investors are putting their money by bringing you our Top 5 most popular Investment ISA plans.
Conditional capital protection
These plans offer some protection of capital against a falling market since they all include conditional capital protection. This means that your initial capital is returned at the end of the investment term, as long as the FTSE has not fallen by more than a specific percentage, normally 50% of its value at the start of the investment.
Your capital will be at risk if the Index does fall below the defined level, in which case your initial capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.
5.28% fixed income each year, monthly payments
Top of the list is the Enhanced Income Plan from Investec which pays a fixed income of 5.28% per year (paid as 0.44% each month) regardless of what happens to the FTSE. Your capital is returned at the end of the plan unless the FTSE 100 Index falls by more than 50%, therefore offering you some capital protection should the stock market fall. However, if the FTSE does fall more than 50% you could lose some or all of your initial investment.
7.5% fixed income, monthly payments
Offering a higher fixed income is Meteor’s FTSE 5 Monthly Income Plan (Morgan Stanley acting as the counterparty) which offers a fixed income of 7.5% each year, paid to you as 0.625% each month, again regardless of the performance of the stock market. The trade off for such a higher level of fixed income is that the return of your initial capital is dependent on the performance of five FTSE 100 shares rather than the Index as a whole. If the value of the lowest performing share at the end of the term is less than 50% of its value at the start of the plan, your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.
10.5% each year even if the FTSE only rises 1 point
Investec also offer our most popular growth plan with their Enhanced Kick Out Plan offering the potential to mature early and return 10.5% for each year the plan has been in place (not compounded). The plan has a maximum term of six years but will mature early if the FTSE at the end of each year is higher than its value at the start of the plan, from the end of year two onwards. Capital is at risk if the FTSE falls by more than 50%.
Potential for 9.1% annual growth even if the FTSE stays the same
The Societe Generale UK Kick Out Plan will mature early or ‘kick out’ provided the FTSE 100 Index closes the end of each year (from year 2 onwards) at or above its level at the start of the plan. If it does, the plan will end returning your original capital plus 9.1% for each year invested – that’s a potential 18.2% in just two years. If the Index closes below the required level each year, no growth return will be paid and your initial capital will be returned in full unless the FTSE falls by more than 50% during the investment term and also finishes below its starting value. In this situation your initial investment would be reduced by 1% for each 1% fall and so you could lose some or all of your investment.
7.75% each year, even if the FTSE falls up to 10%
For those looking to take a more defensive view of the FTSE, Investec’s Defensive Kick Out Plan offers to return 7.75% per year (not compounded) provided the FTSE has not fallen by 10% or more at the end of each year (from year 3 onwards). The investment will kick out at the end of each year, from year 3 onwards, provided the FTSE 100 Index finishes above 90% of 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% at the end of the 6 year term. If it is, your initial capital will be reduced by the same amount as the fall in the Index, so you could lose some or all of your initial investment.
How to apply
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. With the 2014/15 ISA deadline imminent, you may not receive the postal pack in time so if you wish to proceed, we recommend you print and complete the application form contained within the email brochure pack attachments. Arrangement fees apply.
Important note – don’t miss out
Please be aware that in order to process completed 2014/2015 ISA application forms in time they must be received by us no later than Wednesday 1st April and so the use of next day delivery services should be considered.
Remember that all of the above plans, with the exception of the SocGen UK Kick Out Plan, allow you to apply for next year’s Investment ISA allowance at the same time (2015/16 tax year, limit of £15,240) and they also accept non-ISA investments. If you have any questions on how to apply please contact our Customer Services team on 0845 308 2525.
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. Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future.
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.