Posts Tagged ‘Investec’
Last updated: 16/08/2016
A kick out investment is a fixed term investment plan that has the ability to mature early or ‘kick out’ each year, providing a fixed growth return along with a full repayment of your initial capital. Since these plans can produce competitive returns even if the market stays relatively flat, these investments seem to be popular in a wide range of market conditions. The current issue of the Enhanced Kick Out Plan from Investec offers the highest rate of any kick out investment based on the performance of the FTSE 100 Index, which perhaps helps to explain why it is one of our most popular investments with both our existing customers as well as new investors.
Here we take a closer look at the main features of the plan and review the risk versus reward on offer to see how this might make for an attractive opportunity in the current investment climate.
In a nutshell
The plan will return 9.50% per year (not compounded) provided the value of the FTSE 100 Index at the end of each year is higher than its value at the start of the plan – so although the FTSE does have to rise, this only needs to be by a single point. Should the plan kick out, your initial investment is also returned in full. If the plan does not kick out, 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.
The term ‘kick out’ refers to the ability of the investment plan to mature early depending on the performance of the FTSE 100 Index. Plans such as these that have the ability to mature early and provide a competitive level of growth have proved popular in recent years with a range of investors. For example, the fact that this plan can achieve investment level returns even if the market stays relatively flat means that investors have the potential to outperform the market. This scenario may appeal to those who are not confident the market will rise strongly in the coming years.
The potential for high returns
In addition to the opportunity for early maturity it is no doubt the potential for double digit returns that have added to this plan’s popularity. The headline return on offer from the current issue is 9.50% annual growth. The return is not compounded, but will be paid to you for each year the investment has been in place, thereby offering compelling returns even if the FTSE stays relatively flat or only rises by a small amount. If the plan does kick out, your initial capital is also returned to you in full along with the growth payment.
Some capital protection from a falling market
The Enhanced Kick Out Plan also includes what is known as conditional capital protection, which means that if the plan fails to kick out by the end of the six year term, the return of your initial investment is conditional on the FTSE not falling by more than 50% of its starting value. If the FTSE stays within this 50% barrier throughout your investment then you will receive a full return of your original investment.
If the Index falls more than 50%, and also ends the term at a level which is lower than its value at the start of the plan, your initial investment will be reduced by 1% for every 1% fall. In this situation there is a risk that you could lose some or all of your capital.
Defined risk and defined returns
Another feature of this investment is that the potential returns are stated up front, prior to investing. This allows the investor to consider the potential upside in the context of the amount of risk they are taking, since you know at the outset exactly what needs to happen in order to achieve the growth returns on offer, as well as a return of your initial investment.
Risk versus reward
The principle of risk versus reward inevitably leads to putting your capital at risk in the search for potentially higher returns. A good benchmark for assessing any investment is to compare what you could get from a fixed rate deposit over a similar timeframe, and then consider whether you are comfortable with the additional risk you are taking in order to receive the potential for a higher return.
Leading longer term fixed rates are currently offering around 2.20% and so by accepting risk to your capital, you are potentially increasing your returns by around 7.30% a year if the plan matures early or produces a return in the final year. The decision is therefore whether you are comfortable with putting your capital at risk and the conditional capital protection offered, in order to have the potential for this level of growth.
Credit ratings and agencies
Another important feature of this plan is that your investment is used to purchase securities issued by Investec Bank plc and which are designed to produce the stated returns on offer based on the performance of the FTSE. This means that Investec’s ability to meet their financial obligations becomes an important consideration. Fitch is one of main global credit rating agencies and Investec Bank plc has a credit rating of BBB with a stable outlook (awarded 27th October 2015).
The ‘BBB’ rating denotes a good credit quality and indicates that expectations of default risk are currently low, although adverse business or economic conditions are more likely to impact than a bank with a higher rating. The stable outlook indicates that the rating is not likely to change in the short to medium term, i.e. in the next 6 months to 2 years.
Investec Bank plc
Investec is an international specialist bank and asset manager with its main operations in the UK and South Africa. Established in 1974, they have approximately 8,500 employees and provide a diverse range of financial products and services, specialising in a number of areas particularly within the banking sector. They are also a market leading provider of investment plans and structured deposits.
In addition to non-ISA investments, this investment has been one of our most popular with ISA investors and is available as a New ISA up to the current limit of £15,240 (2016/17 tax year), and also accepts transfers from both Cash ISAs and Stocks & Shares ISAs. Please check the plan details for any application or transfer deadlines that apply. The minimum investment is £3,000.
Fair Investment conclusion
Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “One of the main reasons investors consider kick out investments is that they can offer the potential for high growth and a full return of capital in as little as 12 months, even if the stock market stays relatively flat or only rises by a small amount. In both of these scenarios, this type of investment offers the potential to beat the market.”
He continued: “Investec’s plan is our most popular kick out investment, offering the potential to kick out at the end of each year and achieve 10.0% growth for each year invested. So depending on your view of what will happen to the FTSE in the coming years, the potential for double digit growth along with a full return of capital, could be considered a good return on your investment in the current climate.”
Click here for more information about the Investec Enhanced Kick Out 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 professional 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 an ISA.
This is a structured investment plan that is not capital protected and is 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.
Investec Bank continues to offer innovative savings plans which combine a competitive interest rate with efficient service and attractive features. So if you have a minimum of £25,000 to deposit, and you want to take advantage of some of the highest savings rates on the market, their latest range of accounts are certainly worth reviewing.
All the Investec savings accounts featured below are covered by the Financial Services Compensation Scheme (FSCS). Please be aware that the FSCS limit for deposits are due to change after 31st December this year.
Investec Bank fixed rate bonds – up to 2.15% AER
For those who are able to tie their money up for a fixed period and are also looking for a fixed and regular rate of interest, Investec offers a trio of fixed term deposits with terms of one, two and three years.
As you would expect, the rate of interest increases with the term – the 1 Year Fixed Term Deposit has been the most popular with savers and pays 1.95% AER, while the 2 Year Fixed Term Deposit pays 2.05% AER. Higher returns are available for those who are prepared to lock their money away for 3 years, with Investec’s 3 Year Fixed Term Deposit offering 2.15% AER.
Interest on all three fixed rate bonds can be paid annually or monthly, they 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 quickly and easily online.
Click here for more information on the Investec 1 Year Fixed Term Deposit »
Click here for more information on the Investec 2 Year Fixed Term Deposit »
Click here for more information on the Investec 3 Year Fixed Term Deposit »
Investec 3 Year Base Rate Plus Account – minimum 2.35% AER
For those who want to take advantage of increases to the Bank of England Base Rate but still want the convenience and security of a minimum fixed return, Investec have shown some welcome innovation in the market with their 3 Year Base Rate Plus.
Perhaps the most popular of Investec’s current savings range, this account pays 0.5% AER/variable above the Bank of England Base Rate for 3 years but with a minimum rate of 2.35% AER, so whatever happens you know you will never earn less than this.
This account therefore offers you the chance to take advantage of any future Base Rate rises over the next three years whilst also offering the safety net of a minimum return. Interest is not compounded and will be paid into your nominated account annually. No early closure or withdrawals are permitted and you can apply easily online.
Click here for more information on the Investec 3 Year Base Rate Plus »
Investec 2 Year Double Base Bond
Finally, for those prepared to tie their money up for 2 years but who also consider an increase in the Bank of England base rate is likely, Investec have shown further innovation with their 2 Year Double Base Bond. This account pays double whatever the Bank of England Base Rates is during the 2 year fixed term, plus an additional 0.50% on top. This means currently you would receive 1.50% (variable).
If the Bank of England Base Rate increased by 0.25% the variable rate would increase to 2.0% and if the Base Rate rose by 0.5% then your variable rate would increase to 2.5%. Investec’s current 2 Year Fixed Term Deposit is offering 2.05% fixed. No early closure or withdrawals are permitted during the term of the plan and interest will be paid annually into your nominated account. Access to you account is via online and telephone banking and you can apply easily online.
Click here for more information on the Investec 2 Year Double Base Bond »
Investec Bank plc
Investec is an international, specialist bank and asset manager with its main operations in the UK and South Africa. The group was established in 1974 and as at April 2015, currently employ around 8,200 people and look after £124.1 billion of third party assets under management. They provide a range of financial products and services and specialise in a number of areas, particularly within the banking sector. Their UK banking operation, Investec Bank plc, looks after £10.3 billion of customer deposits. They are also a market leading provider of investment plans and structured deposits.
Click here to compare all Investec savings accounts »
Click here to compare all Investec structured deposits and investment plans »
No news, feature or comment should be seen as a personal recommendation to invest. If you are at all unsure of the suitability of this type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
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.
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.
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.”
Click here for more information »
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.”
Click here for more information »
Fixed term investment plans that have the ability to mature early or ‘kick out’ each year seem to be popular whatever the market conditions but particularly so when the FTSE is at historically high levels. The Enhanced Kick Out Plan from Investec currently offers the highest rate of any kick out investment based on the FTSE 100 Index which helps to explain why this plan is proving so popular both with our existing customers as well as new investors. We take a closer look at the plan and review the risk versus reward on offer to see how this might make for an attractive opportunity in the current investment climate.
Investors looking to gain a broad exposure to the UK stock market often look to investments linked to the performance of the FTSE 100 Index. But despite its recent dips, the Index continues at what are historically high levels, and so many investors find it difficult to decide whether now is the right time to invest or not.
Investors considering their options are often split down the middle – on the one side are those who feel confident that the Index can break through the 7,000 point barrier again and keep going, and then there are those on the other side who remain uncertain that the market will continue to rise.
The FTSE 100 Enhanced Kick Out Plan from Investec continues to be popular with both existing customers and new investors. Many of our existing customers have investments that have matured recently or are likely to mature early in the coming months, thereby providing them with the opportunity to consider new investment opportunities and many have considered this plan. For new investors, the headline rate of 10% is also proving a compelling opportunity in the current investment climate and has been particularly popular with those using their £15,240 New ISA allowance – so how does the investment work?
In a nutshell
The plan will return 10% per year (not compounded) provided the value of the Index at the end of each year is higher than its value at the start of the plan – so although the FTSE 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.
The term ‘kick out’ refers to the ability of the investment plan to mature early depending on the movement of the FTSE 100 Index. Plans that have the ability to mature early and provide a competitive return on your capital have proved popular with investors in all types of markets.
The fact that investors can achieve investment level returns even if the market stays relatively flat could also be why this investment has proved particularly popular, whilst the FTSE remains at historically high levels.
The pressure on savers to maximise the returns from their capital is arguably greater than ever before, but despite inflation being at rock bottom, the current market for instant access and fixed rate bonds rarely offers us anything to shout about. We therefore take a look at a selection of opportunities that are being considered by savers looking for the potential to enhance their returns, all of which are available both in and outside of an ISA.
Savings rates, dire straits
The mainstay of many a saver’s portfolio has historically been the fixed rate bond. However, rates here still remain at historically low levels as banks have been able to secure cheap funding by alternative means which has resulted in an increasing number of savers shoring up reserves in instant access accounts. But with leading deals only offering around 1.25% AER variable, there is little prospect of growth on your capital over and above the cost of living. And with longer term fixed rates only offering around 3.0% AER, long gone are the days where committing your money for longer was all you needed to secure a competitive rate.
Alternatives bridging the gap?
The implications of the current savings rates on offer need to be taken very seriously since it calls into question the traditional thinking behind many saver’s decisions. Also gone are the days when it was enough to keep a relatively small amount in instant access and then simply roll your fixed rate bond into the prevailing rate available at maturity.
Although fixed rate bonds should continue to play an important part in the savings jigsaw, their status as being the only option for money we do not need immediately should be carefully reviewed, especially in the context of the historically low rates on offer. So what alternatives are being considered?
Last updated: 09/06/2015
By combining a high level of regular fixed income with some capital protection against a falling stock market, the Enhanced Income Plan from Investec Bank has year on year been one of our most popular income investments. With the need for income often at the forefront of both savers and investors minds, we take a look at why this investment plan has proved to be a consistent best seller.
Income needs high on the agenda
Whether you are working and need to supplement your earnings, or retired and looking at options for your pension or ways to add to your pension income, the need for income is one of the most common demands put on our capital. In the last few months we have also witnessed some of the most radical changes to pension legislation in living memory, allowing individuals far greater flexibility to withdraw cash from their pension. But as annuity rates continue to offer low annual yields, whatever your situation the ability to generate an attractive income stream is a challenge, despite usually being the first item on the agenda.
Savers and investors face contrasting fortunes
Apart from a few blips, investing in the stock market over the last couple of years will have been a rewarding experience, culminating in the FTSE breaking through the 7,000 barrier for the first time in history. And yet despite the attractive dividend yields we have seen from a number of our largest companies, whilst the FTSE 100 Index remains at record high levels, there are many investors who remain uncertain about the level of income that might be enjoyed in the coming years. Remember, it is the income and any capital loss/rise combined that contribute to your overall return.
In contrast to the growth of the FTSE, savings rates are still at record lows and with no realistic prospect of a quick turnaround to the rates of yesteryear, whatever your situation the ability to meet income needs remains a very real challenge. But against this backdrop of intense pressure on savers, and whilst stock market conditions perhaps raise more questions than they do answers, this investment from Investec has remained a top seller with income seekers
In a nutshell
The Enhanced Income Plan is a relatively straightforward plan to understand. The current version offers investors a high fixed income of 5.16% each year and your investment has a fixed term of six years. Your capital is at risk should the FTSE 100 (‘the FTSE’) fall below 50% of its starting value on any closing date throughout the investment term and also finishes below the starting value. This is known as conditional capital protection and is one of the plan’s main differentiators from other types of income investments.
The current issue of the plan offers a high level of income at 5.16% per year, but whilst yield on many traditional income investments is normally variable, one of the main features of the Enhanced Income Plan is that the income is fixed rather than being dependent on the stock market. This means that the investor has the certainty of knowing at the outset exactly how much he will receive each and every year.
Fixed income investments have risen in popularity year on year as more and more investors seek out new ways to generate a predictable and regular income from their capital. This popularity increases none more so than at this time of year, when the additional feature of receiving income tax free when holding your investment plan within an ISA is another reason to consider your options. So with ISA season upon us, and whilst savings rates continue to force many to consider taking on more risk with their capital, we take a look at what fixed income investments can offer and how to compare the latest plans available.
The here and now
Not only have fixed income investments been one of the real success stories in recent years having seen a significant surge of interest since the stock market crash of 2008/9, but this interest seems to be increasing as the needs and demands put on more of us from our capital fails to be met by traditional products, which often have variable and less predictable income.
Savings rates have also fallen dramatically over the same period with top five year fixed rate bonds currently paying around 3.0%, whilst fixed rate Cash ISAs are much lower at around 2.4%. So fixed term deposits are failing to deliver the returns so many cash savers had grown used to, causing many to consider having to take on more risk with some of their capital.
What is a fixed income investment plan?
The fixed income investment, or reverse convertible to give it its technical name, is a fixed term investment where the level of income received is fixed at the outset and is paid to you regardless of the performance of any specific shares or the stock market as a whole. The return of your initial investment is however determined by the stock market, which in usually based on the performance of a major stock market index such as the FTSE 100 (the Index) or a number of shares listed on the Index.
Because the income is not reliant on the performance of the stock market, investors have the benefit of knowing at the outset exactly how much income they will receive and when it will be paid. This certainty of income and timing is undoubtedly playing a key role in their popularity.
Fixed income, fixed term
Not only is the income fixed, but the term of the plan is also. The plan term is normally in the region of five to six years, thereby providing a defined period during which your capital is invested. This combination of a pre-determined fixed income paid over a fixed term creates an investment that is relatively straightforward to understand and which is more easily comparable to other income investments available in the market.
This contrasts with investing directly in shares or a UK equity income fund where in addition to your capital being exposed to daily stock market fluctuations, in both cases your income is variable and not necessarily predictable. Fixed income investments therefore offer a unique set of investment features when compared to more traditional income investments.
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.