Archive for the ‘Structured deposit plans’ Category

Savings Focus: Investec Retirement Deposit Plan offering 3.75% each year

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Last updated: 08/11/2016

There’s no denying that the outlook for traditional Cash ISAs at the moment is bleak. Not only are savings rates at rock bottom, but banks don’t really want the additional cost of having to run the Cash ISA tax wrapper that goes with it – most high street banks simply do not want your Cash ISA money – and therefore for those that do, they only need to offer a low rate of interest to get it. For those looking for alternatives, this new launch Cash ISA from Investec Bank plc offers an interesting way to receive tax efficient withdrawals each year, combined with the potential to receive back an amount equal to your initial deposit at the end of the fixed term. Here we take a closer look to see how it stacks up.

Traditional Cash ISAs offering low returns

The banking and economic environment continue to create challenges for savers, brought about in the main by the impact of record low interest rates on our savings and our future. The current market for traditional Cash ISAs still offers some of the lowest rates ever seen. In fact, you are hard pushed to get much over 1.50% in return for tying up your money for five years, which is why many looking for a fixed rate are considering shorter term options.

Currently our most popular deals come from Aldermore Bank, paying 0.95% AER, 1.15% AER and 1.20% AER on their 1, 2 and 3 year fixed rates respectively. You can save from £1,000 and can transfer existing ISAs. Our leading instant access account is the AA Cash ISA Easy Access, paying 0.75% AER variable.

Cash ISA alternative – potential for higher returns

By linking the amount of capital that is returned to you at the end of the plan to the FTSE 100 Index, this structured deposit plan offers the potential for higher returns than those that are available from more traditional products such as fixed rate Cash ISAs. So the upside is the potential for higher returns, whilst the downside is that since your return is linked to the performance of the UK stock market, unlike a fixed rate it is not guaranteed. This is the trade off for the opportunity to receive higher overall returns.

Fixed payments of 3.75% each year

The Investec FTSE 100 Retirement Deposit Plan has a fixed term of 6 years and pays a fixed payment of 3.75% each year, paid to you regardless of what happens to the FTSE 100 Index. Over the six year term this equates to 22.5%.

Capital returned at the end of the plan

The aim of the plan is to withdraw fixed annual payments from your initial deposit over 6 years, and repay the remainder of your initial deposit plus an additional return at maturity. The amount of capital returned at the end of the plan therefore, is either the remaining 77.5% of your initial deposit, or the remaining 77.5% plus an additional return of 22.5%.

This additional return is paid provided the FTSE 100 is higher than 90% of its level at the start of the plan, so the Index could have fallen up to 10% and you would still receive this additional return. If the FTSE has fallen by 10% or more, the amount returned to you will only equal the remaining amount of your initial deposit (i.e. no growth will be achieved).

‘Defensive’ feature

Since the additional return on offer is dependent on the performance of the FTSE 100 Index, the defensive feature of the plan is an important one to understand. Rather than the Index having to finish higher than its value at the start of the plan, the Index can fall up to 10% and the fixed return of 22.5% is still paid.

The use of averaging

When calculating the final level of the FTSE 100 Index the plan takes the average of the closing levels of the Index on each business day during the last 6 months of the plan term. The use of averaging can reduce the adverse effects of a falling market or sudden market falls whilst it can also reduce the benefits of an increasing market or sudden increases in the market during the last six months of the plan.

Returns compared

The 3.75% annual payment is well over double any fixed rate on offer from a traditional Cash ISA. However, it is important to remember that in the case of a traditional fixed rate Cash ISA, your initial deposit is always returned in full at the end of the fixed term. Although the annual payments from the Investec plan are fixed and paid each year, it is only if the additional return is paid at the end of the plan term would you be better off overall.

Capital protection

Since the plan is a structured deposit you will receive the remainder of your initial deposit back in full at the end of the six year term regardless of what happens to the FTSE 100 Index, and as long as the deposit taker for the plan, Investec Bank Plc, is able to repay your money. The bank’s ability to stay solvent and repay your capital is known as counterparty risk and is the same risk you take with any capital deposited with an institution with a UK banking licence.

In the event that Investec is unable to meet its liabilities, this deposit plan is eligible for Financial Services Compensation Scheme (FSCS) protection. Therefore, eligible depositors could be entitled to claim up to £75,000 per person.

Investec Bank plc profile

Investec is an international specialist bank and asset manager with its main operations in the UK and South Africa. Established in 1974, they currently employ around 9,000 people and as at 31st March 2016, look after £121.7 billion of customer assets. They provide a range of financial products and services and specialise in a number of areas, particularly within the banking sector. Their banking operation looks after £24.0 billion of customer deposits and they are also a market leading provider of investment plans and structured deposits in the UK.

Cash ISA only

Please note that this plan is only available as a Cash ISA. The plan also accepts ISA transfers, from both Cash ISAs and Stocks & Shares ISAs and has a minimum deposit of £3,000 and the maximum deposit for a new current year ISA (2016/17) is the ISA limit of £15,240.

Fair Investment view

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “There’s no getting around the fact that the rates on offer from traditional Cash ISA savings products remain at record lows, and this looks set to continue. This is a real challenge for savers. By combining capital protection, fixed annual payments and the potential for an additional 22.5% return at maturity, this new launch from Investec offers an interesting alternative. The best long term fixed rate Cash ISAs are currently only offering a little over 1.50%, so if this plan pays the growth return at maturity, your overall return will be well over double these top deals.”

He continued: “Both are treated the same for FSCS purposes (up to the usual deposit scheme limits) but unlike the fixed rate Cash ISA, the maturity payment on the Investec plan is dependent on the FTSE and is not therefore guaranteed. So if you are prepared to sacrifice a guaranteed rate of interest, then the potential higher returns on offer could be appealing in the current economic climate.”

This plan is open now for new ISA deposits up to the £15,240 allowance for the current tax year (2016/17), as well as Cash ISA and Stocks & Shares ISA transfers. The minimum investment is £3,000.

 

Click here for more information about the Investec FTSE 100 Retirement Deposit Plan »

 

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. Always remember to check whether any charges apply before transferring or switching an ISA.

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 capital 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 deposit 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.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Savings Focus: Investec 6 Year Defensive Deposit Plan

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Updated: 02/09/2015

The economic environment continues to create challenges for savers, brought about in the main by the impact of record low interest rates on our savings and our future. Whilst the current market for traditional fixed rates still offers some of the lowest rates ever seen, it is perhaps easy to understand why the potential for higher returns available from the range of structured deposit plans is becoming a more compelling option for savers to consider. With this in mind, we take a detailed look at one of our most popular, the FTSE 100 6 Year Defensive Deposit Plan from Investec Bank, to find out why this plan could be an alternative for your deposit or Cash ISA savings.

Traditional savings products underperforming

The current economic environment is as challenging as it’s ever been and those that are feeling it most are cash savers looking for a competitive net return on their deposit, once tax and inflation are taken into account. Unfortunately, many traditional savings products are failing to deliver with both instant access and fixed rate bonds continuing to offer record low rates.

Potential for higher returns

By linking your returns to the FTSE 100 Index, this structured deposit plan offers the potential for higher returns than those that are available from more traditional products such as fixed rate bonds. The upside is the potential for higher returns whilst the downside is that since your return is linked to the performance of the UK stock market, unlike a fixed rate it is not guaranteed. This is the trade off for the opportunity to receive higher returns.

Potential return of 33% after 6 years

The Investec FTSE 100 6 Year Defensive Deposit Plan protects your initial deposit whilst offering a fixed return of 33%, provided the level of the FTSE 100 Index at the end of the plan is higher than 90% of its value at the start of the plan, subject to averaging. So the FTSE can fall up to 10% and you still receive the full growth return. The 33% fixed return is equivalent to around 4.85% AER. If at the end of the six year term the Index is equal to or lower than 90% of its value at the start of the plan, you will not receive a return but your original capital will be repaid.

‘Defensive’ feature

Since the fixed return on offer is dependent on the performance of the FTSE 100 Index, the defensive element of the plan is an important one to understand. Rather than the Index having to finish higher than its value at the start of the plan, the Index can fall up to 10% and the fixed return of 33% is still paid. Whilst the FTSE remains at what are historically relatively high levels, this could be an appealing feature.
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A Saver’s Guide to Structured Deposit Plans

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Last updated 24/11/2015

Structured deposits have experienced a rapid rise in popularity on the back of a sustained period of record low interest rates and falling savings rates. Whilst fixed rates remain under pressure and there is still uncertainty around the real increase in the cost of living in many parts of the UK, many savers are having to consider investing in order to try and meet the increased demands from their capital. But there is a middle ground that does not put your capital at risk – the structured deposit. To help you better understand this alternative product range, and to help you find out whether they could work alongside the other savings you have, we have put together our Saver’s Guide to Structured Deposits.

Savings rates reality

The mainstay of many a saver’s portfolio has historically been the fixed rate bond. However, rates here have been under continued pressure as banks have been able to secure cheap funding by alternative means. This means long gone are the days where committing your money for longer was all you needed to secure a high return that also had the potential to outstrip inflation. With many maturing fixed rate bondholders facing significant falls in the yields available, longer term fixed rates are in many cases failing to meet the needs of savers.

In addition to investing some of this capital to try and make it work harder, at the other end of the risk spectrum this has also resulted in a worrying trend of many savers shoring up more money than they normally would in instant access accounts. With many of these failing to offer rates anywhere close to inflation, savers are losing money in real terms – and that’s before the impact of tax is taken into account. So savers continue to face the toughest of decisions – either lose money in real terms from a savings account or take on more risk – and it is against this savings rates reality that the structured deposit has increased in popularity.

What are structured deposits?

Structured deposits are fixed term deposit accounts paying a return linked to the performance of an underlying investment, often the FTSE 100 Index or several shares in FTSE 100 listed companies. They therefore typically offer higher potential returns than a cash deposit, but also involve taking on more risk since unlike instant access accounts and fixed rate bonds, the return from a structured deposit is not guaranteed. They normally have a term of around five or six years although some also have the ability to mature early each year.

Who are they for?

Since your return is not guaranteed, they are for savers who are willing to give up the interest on a standard deposit for a potentially higher return linked to the performance of an underlying investment.
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Time for savers to face the truth

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For those who are not prepared to risk their capital to try and achieve higher returns, the ability to rely on traditional savings products has never been more challenging. Savers keen to maximise the level of FSCS protection with their capital have only really had a couple of options historically. Either accept a variable rate but have instant access to your savings, or alternatively sacrifice access and receive a higher interest rate depending on how long you are able to tie up your money.

But as savers continue to face significant falls in the level of income available, more and more of us are having to face the truth about just how serious the situation is. So what are you doing with your savings and have you questioned your decisions in the past? Here we take a look at the harsh reality being faced by savers whilst looking at the pros and cons of the options being considered. Our Head of Savings and Investments, Oliver Roylance-Smith, will also offer his own view in the context of the current savings rates on offer and the outlook for the market in the coming years.

‘Tis the season to be jolly…

Unfortunately the start of advent has not brought with it any gifts for savers. Although the plight of savings rates often takes a back seat to the more economically charged debate around when we might see a rise in interest rates, the ongoing situation for savers is a fairly easy one to square off.

The current Bank of England base rate of 0.5% is the lowest it has ever been, and with the Monetary Policy Committee (MPC) voting again this month to keep it on hold, we are now in the 68th consecutive month of this record low – that’s’ over 5 and half years…  So if you’ve ever made a decision on your savings based on the hope that interest rates might go up within the next 12 months, you now have a constant reminder of how painful this can be.
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Savings Focus: Investec Kick Out Deposit Plan

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The challenging environment for savers continues as more and more of us are being forced to face the truth about the impact of record low interest rates on our savings and our future. With the current market for traditional fixed rates offering some of the lowest rates ever seen, it is perhaps easy to understand why the potential for higher returns available from the range of structured deposit plans is becoming a more compelling option for savers to consider. With this in mind, we take a detailed look at the Kick Out Deposit Plan from Investec Bank to find out why this particular plan has been proving so popular.

Traditional savings rates underperforming

The current economic environment is as challenging as it’s ever been and those that are feeling it most are savers looking for a competitive net return once tax and inflation are taken into account. Unfortunately traditional savings rates are failing to deliver with both instant access and fixed rate bonds continuing to offer record low rates.

Leading one year fixed rate bonds currently offer around 1.9%, three year fixed rates around 2.5% and up to 3% is on offer if you can fix for five years. Top deals a year ago would have secured you 2%, 2.55% and 3.15% over these same terms and so the current best buys are even lower than they were 12 months ago. As for instant access accounts, these are currently paying a paltry 1.50% AER and so all but non-taxpayers are losing money in real terms despite the headline rate of inflation standing well below the Bank of England’s 2% target.
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Summer Sizzlers, Part 1 – Which Savings Accounts are Hot this Summer?

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It’s not only the performance of our athletes at the Commonwealth Games that has been sizzling this summer, as there are clear signs that the savings market is beginning to hot up by offering more competitive rates and bringing some much needed innovation. In the first of a two part feature, we let you know which savings accounts are also performing well this summer by giving you our selection of summer sizzlers from the best the market has to offer.

Inflation and interest rates keeping us on our toes

But it’s not just the athletes that are being talked about. Inflation had been expected to come in around the 1.60% but instead the Consumer Price Index grew by 1.90% in the year to June, the largest increase for almost 2 years. It also means that basic rate taxpayers need to earn at least 2.38% just to break even, higher rate taxpayers over 3.16%.

However, although the increase hands the Bank of England even more ammunition for a rise in interest rates, most economists are in agreement that rates will start to rise next year – or perhaps at the end of this year but that a sharp and sudden rise is extremely unlikely with a slow and limited increase expected. However, things can change and change quickly, so the bottom line is that whatever happens, you need to be aware of the implications of inflation and the impact interest rate rises may have before deciding which route to take.

Savings accounts – what’s hot?

Regardless of how long you can tie up your money, from instant access to long term savings alternatives, there should be something here for everyone including guaranteed fixed rates, rates that can increase with interest rate rises, as well as savings alternatives which offer the potential to beat rising inflation.

Instant access

Research from the financial services regulator, the Financial Conduct Authority, recently stated that loyal bank customers are not being rewarded and are experiencing lower rates on their savings compared to those who shop around. Their research showed that while the average interest rate on an instant access account opened in the last two years was 0.8%, accounts that were opened more than five years ago offered just 0.3%, the effect of introductory bonuses ending being one of the main culprits.

Savings Maximiser is a cash management service  that compares the best buys from across the market and by regularly reviewing your accounts and making switches if a better rate is available, aims to secure a consistently competitive rate of interest. Aimed at those who want to retain instant access to their money at all times and have at least £25,000 to keep on deposit, the service offers full banking facilities and is simple, secure and saves you time. With the ever increasing number of savings rates on offer, the pace of changes to market leading rates and potential interest rate rises on the horizon, this could be a perfect time to consider this service.

Click here to find out more about Savings Maximiser »

Short term savings – 1 Year Fixed Rate Bond, 1.95% AER

With predictions pointing to a base rate hike above 1% unlikely until 2016, one year fixed rates are proving popular and for those who are able to tie up their money and are also looking for a fixed and regular rate of interest, Investec Private Bank is offering 1.95% AER on their 1 Year Fixed Term Deposit. The minimum deposit is £25,000 and interest can be paid annually or monthly, the account can be set up as a single or joint account and access to account information is online or via telephone. As with most fixed term accounts, no early withdrawals are permitted. You can apply online, request further information to be sent to you via email of have someone from the bank call you back directly.

Click here to find out more about the Investec 1 Year Fixed Term Deposit »

Medium term savings – 3 Year Base Rate Plus, 2.60% AER minimum

Investec has also shown some welcome innovation in the market with their 3 Year Base Rate Plus. The account pays 1% AER/variable above the Bank of England Base Rate but with a minimum rate of 2.60% AER, so whatever happens you know you will never earn less than this.  Interest is not compounded and will be paid into your nominated account annually. No early closure or withdrawals are permitted.

The Base Rate Plus account offers innovation for savers by combining a competitive minimum return that is fixed, along with the potential to benefit from any increase to the Bank of England Base Rate for those who think it could perhaps rise quicker than currently expected.

Click here to find out more about the Investec 3 Year Base Rate Plus Account »

Medium to long term savings alternative – potential 5.25% each year, from year 3

For those prepared to tie in for the longer term but who would like the opportunity for their plan to mature early, the Kick Out Deposit Plan from Investec offers the potential to mature from year 3 onwards. The plan offers a potential 5.25% per year (not compounded) and will mature early or ‘kick out’ provided the value of the FTSE 100 at the end of each year from year 3 onwards, is higher than its value at the start of the plan (subject to averaging) – even by just one point. That’s a potential 15.75% after 3 years. If the Index is lower on all of these dates you will only receive a return of your initial deposit.

Our leading 3 year fixed rate bond is paying 2.65%, with lower rates available for fixing within a Cash ISA.  So if you’re looking for new ways to use your savings and are prepared to sacrifice a guaranteed return, this plan could provide almost double the current fixed rates on offer.

Click here for more information about the Investec Kick Out Deposit Plan »

Long term savings – 5 year fixed rate bond, 3.11% AER

The additional premium for committing your savings for the longer term has narrowed recently and yet the demand for this length of fixed rate is still high. Vanquis Bank’s 5 Year Fixed Rate Bond is currently offering 3.11% AER with a low minimum deposit of £1,000 and you can apply online. There are annual or monthly interest options but no withdrawals are permitted.

Click here for more information about the Vanquis Bank 5 Year Fixed Rate Bond »

Long term savings alternative – maximum 40% growth return

For those looking for the potential for higher growth and are prepared to tie their money up for the longer term, the Defensive Supertracker Deposit Plan from Morgan Stanley offers a number of features that savers might find attractive. Firstly, your return is linked to any rise in the FTSE 100 Index over the term, which is then doubled (subject to a maximum return of 40% of your initial investment) and secondly, the rise is based on any increase above 95% of its starting level. So even if the FTSE ends the same you would receive 10% (2 x 5%), and if it rose by 10% you would receive a 30% return (2 x 15%). If the Index finishes below 95%, no growth return would be paid and you will only receive your initial capital back.

Finally, your initial deposit is protected whatever happens to the FTSE and is also eligible for FSCS protection – Lloyds Bank plc is the deposit taker for this plan. Our leading five year fixed is offering 3.11% AER, so if the FTSE rises by over 15% at the end of the term, you could more than double the leading fixed returns on offer, but if it only goes up a little or falls, you would have been better off with a fixed rate.

Click here for more information about the Morgan Stanley Defensive Supertracker Deposit Plan »

 

Compare instant access accounts »

Compare one year fixed rate bonds »

Compare three year fixed rate bonds »

Compare five year fixed rate bonds »

Compare alternatives to fixed rate bonds »

AER – Stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

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 plan. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek professional advice.

Some of these plans are structured deposit plans that are 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.

Interest Rate Latest and Why More Savers are Turning to Investments

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You would be hard pushed not to hear the continuing speculation around when the next interest rate rise will be, and with good cause. This has the potential to affect all of us and so understanding when this might occur, and the impact it will have, is understandably a top priority. In addition, the recent changes to the ISA rules have resulted in greater flexibility and an increased allowance of £15,000. Although good news for both savers and investors, the former continue to find it tough as savings rates remain low. We take a look at the potential impact a rise in interest rates might have as well as why more and more savers are starting to consider their investment options.

Interest rate latest

Interest rates have remained at their record low for over five years. When Mark Carney took over as governor of the Bank of England, he initiated the Bank’s ‘forward guidance’ which linked a nudge up in interest rates would occur should unemployment move below7%. Since then, there have been increasing attempts to move away from this measure as the unemployment rate dipped quicker than expected. Predictions of when a rise might occur have since abounded with a rise seemingly getting closer and closer, or, as Mr Carney put it when speaking at the annual Mansion House dinner last month, ‘could rise sooner than markets currently expect’. He said that although there is no pre-set course for this to take, ‘2.5% is likely to become the ‘new normal’ level for the base rate by 2017’.
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A Saver’s Guide to Structured Deposits

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Structured deposits have experienced a rapid rise in popularity on the back of a sustained period of record low interest rates and falling savings rates. Fixed rates are under pressure and with the continued uncertainty around inflation and the cost of living often rising faster than the increase in workers and pensioner’s earnings, many savers are turning to investing in order to try and meet the increasing demands from their capital. But there is a middle ground that does not put your capital at risk – the structured deposit. So that you may better understand this alternative product range and to help you find out whether they could compliment the other savings you have, we have put together our Savers Guide to Structured Deposits.

Savings rates reality

The mainstay of many a saver’s portfolio has historically been the fixed rate bond. However, rates here have been under continued pressure as banks have been able to secure cheap funding by alternative means. This means long gone are the days where committing your money for longer was all you needed to secure a high return that also had the potential to outstrip inflation. With many maturing fixed rate bondholders facing significant falls in the yields available, longer term fixed rates are in many cases failing to meet the needs of savers.

In addition to investing some of this capital to try and make it work harder, at the other end of the risk spectrum this has also resulted in a worrying trend of many savers shoring up more money than they normally would in instant access accounts. With many of these failing to offer rates anywhere close to inflation, savers are losing money in real terms – and that’s before the impact of tax is taken into account. So savers continue to face the toughest of decisions – either lose money in real terms from a savings account or take on more risk – and it is against this savings rates reality that the structured deposit has risen in popularity.
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Top 10 Income Ideas for 2014

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Income needs are a top priority for both savers and investors, evidenced by the increasing number of our existing customers and those new to Fair Investment looking for income solutions. With this in mind, we have put together our Top 10 income ideas for 2014. From a fully capital protected bank deposit and a unique fixed income investment, to investment funds and fixed term investment plans offering high yield opportunities, there should be something here that appeals. We also give you our in-house view of each from Oliver Roylance-Smith, our Head of Savings and Investments and for those who are yet to use their ISA allowance, all are available within an ISA so you could benefit from tax free income.

1.   Income best seller – 5.40% fixed income, monthly payments

The Enhanced Income Plan from Investec was our most popular income investment in 2013 and continues to be a best seller. The main appeal is that it offers a fixed income for a fixed term, regardless of the performance of the FTSE 100 Index, so you know exactly how much you will receive, when and for how long. The annual income is currently 5.40% (paid as 0.45% each month) which is high when compared to typical yields currently being paid by equity income funds. Capital is at risk if the FTSE drops by more than 50% during the plan and fails to recover by the end of the term, in which case your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment. There are no annual management charges with this plan.

Fair Investment view: “5.40% tax free income (if held in an ISA) is the equivalent of 6.75% taxable income for a basic rate tax payer and 9.00% for a higher rate tax payer. This high level of fixed income and the monthly payment frequency are popular features and with ongoing uncertainty around future interest rates and dividend yields, this plan offers a competitive balance of risk versus reward that could be considered by both savers and investors”

Click here for more information »

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