Summer Sizzlers: Which investments are hot this summer?
As we move into August, we take a look at our five most popular investment plans since British summer officially started on 21st June. This has already been a busy summer, with a growing number of competitive income and growth plans on offer. As you might expect, with savings rates continuing at uninspiring levels and many savers inevitably looking to take on more risk in the hunt for higher returns, income investments feature heavily in this, the first of a two part feature of our summer’s most popular plans.
1. 10% per year, even if the FTSE stays flat
With the potential for the double digit returns and the opportunity to mature early from year one onwards, the Investec Enhanced Kick Out Plan has been one of our best selling kick out plans and this summer is no exception. The plan continues to be a top performer, and will return 10% per year (not compounded) provided the value of the FTSE 100 Index at the end of each year (from year 1 onwards) is higher than its value at the start of the plan – so although the Index does have to rise, this only needs to be by a single point. Your initial capital is at risk if the Index falls by more than 50% during the term and also finishes below its starting value, in which case your capital will be reduced by 1% for each 1% fall.
Fair Investment view: “Knowing how to invest when the FTSE is high continues to be a challenge for investors, but the potential for high returns as early as year 1, even if the FTSE only rises by a single point, perhaps helps to explain why this is our best selling plan with both growth investors and those looking for New ISA investment ideas. We’ve not been able to talk about the potential for double digit returns for a while, so if the combination of high growth returns, the ability to mature early, as well as some capital protection against a falling market sounds appealing, this might make for a compelling opportunity in the current investment climate.”
2. 7.32% p.a. fixed income, monthly payments
The Meteor 4 Year Income Plan is the first fixed income plan to feature in our summer’s hot list and offers 7.32% annual income (paid as 0.61% each month). One of the main reasons for the high level of fixed income is that the return of your initial capital is dependent on the performance of four FTSE 100 shares rather the Index as a whole. Should the value of the lowest performing share be 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.
Fair Investment view: “If you invest within an ISA, the 7.32% fixed income is equivalent to 9.15% p.a. for basic rate tax payers and 12.20% p.a. for higher rate tax payers. The four year term and the monthly fixed income on offer may well appeal to income investors but you should also consider that there is a higher risk to your capital than an investment based on the performance of the FTSE 100 Index.”
3. 5.28% fixed income each year, monthly payments
The second income plan also offers a fixed income, paid to you regardless of the performance of the stock market. Our ISA season best seller, the Investec Enhanced Income Plan also continues to be a top performer with income seekers, the current issue paying a fixed annual income of 5.28%. The plan pays monthly (paid as 0.44% each month) regardless of what happens to the FTSE. Capital is at risk if the FTSE falls by more than 50% 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, so you could lose some or all of your original investment.
Fair Investment view: “Knowing exactly how much you will be paid, when and for how long are clearly features which have struck a chord with both savers and investors and the monthly payment frequency is a popular feature. So if you you’re looking for a fixed and regular income, and you consider a return of capital unless the FTSE 100 Index falls by more than 50% to be a fair trade off, the Enhanced Income Plan could be an appealing investment, with tax free income available if held in an ISA.”
4. Up to 6% annual income, quarterly payments
Our third income entrant is the Focus FTSE Quarterly Contingent Income Plan which offers up to 6% per year over the six year term. Your income is dependent on the performance of the FTSE 100 Index and a quarterly payment of 1.50% is made provided the value of the FTSE 100 at the end of each quarter are at or above 75% of its value at the start of the investment. If the Index is below 75% of its opening level, no income payment will be made for that quarter. Your initial investment is returned in full unless the FTSE has fallen by more than 40%, measured at the end of the fixed term only. If it has fallen below this level, capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.
Fair Investment view: “Those seeking income from their investments often put the potential yield and frequency of payments as their top priorities, so the opportunity for a high level of income and quarterly payments should be appealing. The plan is also available as an ISA, in which case your income would be tax free. So for those looking for income and ISA investment ideas, this plan could offer a compelling balance of risk versus reward.”
5. 7.55% annual returns even if the FTSE falls up to 15%
Our final entry is a defensive investment option for those who are not confident the FTSE will continue to rise over the medium term. The Focus FTSE Defensive Kick Out Plan aims to deliver competitive even in a slightly falling market and will kick out and return 7.5% for each year invested provided the level of the FTSE 100 Index is at or above the required level at the end of each year. The required level is 100% of its starting value at the end of year two, 95% for the next three years and then 85% in the final year. So the FTSE could fall up to 15% and you still receive a return.
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 has fallen by more than 40% at the end of the term. If it has, your initial investment would be reduced by 1% for each 1% fall and so you could lose some or all of your investment.
Fair Investment view: “This type of plan is proving popular with investors concerned about the historically high level of the FTSE and would therefore like to include a defensive element to their investment. This plan may appeal to those who think the FTSE might fall slightly, stay the same, or rise in the coming years but not significantly.”
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. This will include everything you need to invest, whether applying for an ISA, transferring existing Cash ISAs and/or Stocks & Shares ISAs or making on-ISA investments. Also note that these plans have different application deadlines, and may also close early so it is important to submit your application as soon as possible. Minimum investments and arrangement fees also apply. Our helpdesk is also available on 0845 308 2525 to answer any questions you may have.
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 due to the performance of the FTSE 100 Index or shares listed within the Index. As share prices can move by a wide margin, plans based on the performance of shares represent higher risk investments than plans based on the FTSE 100 Index as a whole.
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 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 shares listed within the Index is not a guide to their future performance.