Posts Tagged ‘investment’

Investment Focus: Investec Enhanced Kick Out Plan

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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.

Early maturity

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.

ISA friendly

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.

Fixed rate head to head: Cash versus Investments

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The appeal of a fixed return from our capital is obvious, which is why the fixed rate bond has been such a popular choice over the years with both savers and income seekers alike. But whilst savings rates continue at their record lows, it is also understandable why some are choosing to consider moving up the risk spectrum in the hunt for higher returns. Although investments generally only offer a variable income, our most popular investment plan offers a fixed income, and so the ability to compare the two options becomes easier. Here we offer a fixed rate head to head, as we compare the pros and cons of our best selling income investment with the top fixed rate bond deals available.

Fixed rate bonds

Fixed rate bonds, or more accurately fixed term deposits, have for some time been a cornerstone of many a saver’s portfolio. Probably the main reason is that they offer a fixed rate of interest, known at outset and which does not change for the duration of the product, so you know exactly how much you will receive and when.

These products also combine a fixed term, so you know exactly how long you will receive the level of fixed income, and provided the bank remains solvent, your capital is protected and returned to you in full at the end of the fixed term. The longer the fixed term, normally the higher the fixed rate of interest offered, as compensation for tying up your money.

Fixed income investments

The income from collective investments (such as funds) invariably comes from equity dividends, bond interest or rental yields from property. Combined with the fluctuation in value of the underlying asset, be this a share, bond or property, then by its very nature the value is neither fixed nor guaranteed and so investments normally offer a variable income – and of course your capital is at risk.

Fixed income investments therefore are not common, which perhaps partly helps to explain why the Enhanced Income Plan from Investec has been our most popular income plan. The plan offers a fixed income and means that you receive your income regardless of the performance of the stock market, so the investor has the certainty of knowing at the outset exactly how much he will receive each and every year.

Cash v investment

The most important difference between the two is that with a fixed term deposit, your capital is treated as a deposit and is therefore protected and returned to you at the end of the term, subject to the bank remaining solvent. However, whilst Investec’s fixed income investment also relies on the bank remaining solvent throughout the term of your investment, the return of your capital is also dependent on the performance of the FTSE 100 Index, therefore your capital is at risk.

Whilst income remains a top priority for many and the appeal of fixed rate remains as high as ever, having a good understanding of the main differences between these two fixed rate options is often not fully explored, so here we compare the key features of each of them:

Fixed rate

The current market leading long term fixed rate bond is the 5 Year Fixed Rate Deposit Account from State Bank of India, which offers 2.50% AER fixed. By historical standards this is one of the lowest on record. The latest issue of the Enhanced Income Plan offers an annual income of 5.04%, which is more than double that offered by the best cash-based fixed rate available.

Payment frequency

Another important feature of fixed rate products is how often the interest is paid. State Bank of India’s fixed rate only pays interest annually, and when you set up your account, an instant access savings account is automatically opened and the interest is paid into this account on an annual basis, so there is also no option to compound your interest either. This is not particularly attractive for those looking to supplement their income with a regular fixed rate payment, or who would like the option to have the interest paid into another account.

The Enhanced Income Plan pays income monthly (0.42% per month), which can often be the most useful in terms of budgeting and is attractive when looking to supplement existing income or boost retirement income from your capital. A monthly option for cash savers is available from Aldermore Bank’s 5 Year Fixed Rate Account which also includes the option for this to be paid into an account of your choice, but the rate is 0.25% lower than the State Bank of India product at 2.25% AER fixed.

Fixed term

Both the fixed term deposit and the Enhanced Income Plan have fixed terms. Historically, five year fixed rates have been the most common long term fixed rate and have offered the higher rates of interest in return for tying your money up a longer period. The Enhanced Income Plan also has a fixed term but this is one year longer at six years. Fixed terms often appeal to those who wish to plan around this and combined with a fixed rate, offer the peace of mind of knowing exactly what will be paid, when and for how long.

Early closure

Premature withdrawals, additional deposits or early closures are not permitted during the term of the State Bank of India fixed term deposit. The Enhanced Income Plan does include the option to withdraw your money early, however the investment is designed to be held for the full term and early withdrawal or closure could result in you getting back more or less than you originally invested, depending on how long your investment has been running and market conditions at the time

ISA option

State Bank of India’s 5 Year Fixed Term Deposit is a non-ISA fixed rate and so is not available as a Cash ISA whilst the Investec plan is available as both an ISA and non-ISA, whilst it also accepts ISA transfers. If you are someone who would otherwise pay basic rate income tax on some or all of the interest received from their capital, by using your ISA allowance you could be up to 20% better off, with greater tax savings for higher rate tax payers.

Market leading five year fixed rate Cash ISAs are only offering 2.0% AER, and so by comparison, the Investec plan offers an even higher increase to your fixed income in return for putting your capital at risk.

Treatment of capital

Since the income from both of these products is fixed for the term of the plan, their main difference is the treatment of your initial capital. The fixed term deposit is capital protected, which means that your initial capital is returned in full at the end of the fixed term (subject to credit risk which is covered below), whilst the Enhanced Income Plan puts your initial capital at risk.

Unlike most income investments, the Enhanced Income Plan does include some capital protection from a falling stock market. This is commonly known as conditional capital protection and means that the return of your initial capital is conditional on the performance of the FTSE 100 Index and will be returned in full at the end of the six year term, provided the FTSE does not fall by more than 50%. If it does fall below 50%, and also finishes the fixed term lower than its value at the start of the plan, your initial investment will be reduced by 1% for every 1% fall, so you could lose some or all of your initial investment.

Credit risk

Repayment of your capital at the end of a fixed term deposit is reliant on the bank being solvent at the time the capital repayment becomes due, whilst an investment into the Enhanced Income Plan is used to purchase securities issued by Investec Bank plc, which means its ability to meet and repay their financial obligations is equally an important consideration. Both of these products therefore contain counterparty credit risk, which means that in the event of the bank going into liquidation, you could lose any future returns as well as some or all of your initial capital.

Credit ratings and agencies

One accepted method of determining credit worthiness of a company is to look at credit ratings that are issued and regularly reviewed by independent companies known as ratings agencies. Fitch is a leading credit agency and as at 1st May 2016, Investec Bank has a BBB rating and the State Bank of India has a BBB- rating, both with a stable outlook. The ‘BBB’ rating signifies both institutions are considered to have a good credit quality with low expectation of failure to repay its debts whilst the ‘-‘ denotes being at the lower end of this particular rating grade. A stable outlook indicates the rating is not likely to change in the short to medium term (around 6 months to 2 years).

Compensation scheme

Provided the deposit taker offering the fixed rate bond has a UK banking licence, your initial capital is normally eligible to be covered by the Financial Services Compensation Scheme which covers potential deposit claims up to a maximum of £75,000 per person, per institution. The Enhanced Income Plan is not a deposit so it would not be covered by the Financial Services Compensation Scheme for default alone.

Risk v reward

The principle of risk v reward means that the search for higher income returns often leads us to consider putting our capital at risk. A good benchmark for assessing Investec’s fixed income investment is to compare the best fixed term deposit rates on offer over a similar timeframe, and then consider whether you are comfortable with the risk to your capital in order to receive a higher fixed return. As detailed above, by accepting risk to your capital the Investec plan offers just over double the market leading fixed term deposit, with a higher increase when compared with leading fixed rate Cash ISAs. The risk is that is if the FTSE falls by more than 50%, you could lose some or all of your initial investment.

Fair Investment conclusion

Whatever fixed rate option is undertaken, it is imperative that the risks of each are fully considered and understood. Whether this is inflation risk, risk of capital loss or credit risk, it should always be remembered that it is the income and capital loss/rise combined that produce your overall return.

Commenting on the cash versus investment fixed rate options, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company, said: “Whilst fixed term deposits offer the peace of mind of a safe return of our initial capital, we cannot also escape the fact that the current rates on offer are some of the lowest on record. But when making a comparison between a cash product and an investment, we must always bear in mind that one offers capital protection, whilst the other puts your capital at risk.”

He continued, “With fixed deposit rates as they are, the pressure is clearly on savers to think long and hard about what to do with their money, and yet whilst the high level of fixed income and the monthly payment frequency are attractive features of the fixed income investment, before considering any investment it is important to understand the balance of risk v reward. The decision is therefore whether you are comfortable with putting your capital at risk combined with the terms of the conditional capital protection offered, in return for the higher fixed returns.”

 

The Investec Enhanced Income Plan is now available for ISAs, ISA transfers and non-ISA investments, with a minimum investment of £3,000. Click here to find out more »

The State Bank of India 5 Year Fixed Term Deposit is now available as a deposit only (non-ISA), with a minimum deposit of £10,000. Click here to find out more »

 

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. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. 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.

The Investec Enhanced Income Plan is a structured investment plan which 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 or any shares listed within the Index is not a guide to their future performance.

Tax treatment 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.

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

FTSE income plans compared – offering up to 7.0% income

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Income investments are consistently our most commonly requested investment plans, with many also choosing to use their ISA allowance in order to receive the income tax free. It is therefore perhaps not surprising that we have seen an increase in the number of fixed term income investment plans available in the market. To this end, we compare three investment plans which between them offer up to 7% income, along with some capital protection against a falling stock market.

Income, income, everywhere

The need for income is one of the most common demands put on our capital, and with continued pressure from record low savings rates and uncertainty around future dividend yields, the defined return and defined risk from structured investment plans have meant these have become increasingly more popular with income seekers.

Features in common

The income plans under the spotlight here are the FTSE Dual Option Contingent Income Plan from Meteor, the FTSE Quarterly Contingent Income Plan from Focus and the FTSE Range Income Plan from Mariana. All three plans have a number of features in common, including:

Based on the performance of the FTSE 100 Index

Both the level of income and the return of your initial capital for all of these plans is dependent on the performance of the FTSE 100 Index (‘the Index’ or ‘the FTSE’). The FTSE is widely recognised as the proxy benchmark for most investment managers, especially those investing predominantly in UK equities. Since the historical volatility is familiar to many investors, they are in a better position to consider the pros and cons of the plan within the context of the underlying investment and the potential income on offer.

Fixed term

All of the plans have a fixed term, and although you do have the option to withdraw your money early, the plans are designed to be held for the full term and early withdrawal could result in you getting back less than you invested. The fixed term may well appeal to those who need to know exactly how long their capital will be tied up for and can benefit from planning around this.

The Focus and Meteor plans also include the ability to mature early or ‘kick out’, which will occur if the Index has gone up by 5% or more at the end of each quarter, from year 2 onwards. If it does, a final income payment will be made along with a full return of your original capital, which may appeal to those who would like to re-consider their investment options should the FTSE rise.

Quarterly income

All three plans offer a quarterly payment frequency, and so investors have a regular opportunity to receive an income payment. Quarterly payments are a popular feature and could be attractive if you are looking for the opportunity to supplement existing income.

Up to 7.0% annual income

These plans are designed for investors looking for a high level of income, with a maximum potential income of between 5.4% and 7.0%. The main difference between the three plans is the level the FTSE has to be in order for the income to be paid each quarter. So depending on what you think might happen to the FTSE in the coming years, these plans cater for a wide range of investor views by covering a number of eventualities.

7.0% income if the FTSE does not fall more than 20%

Option 2 of the Meteor Dual Option Contingent Income Plan offers a quarterly payment of 1.75% provided the FTSE at the end of each quarter has not fallen by more than 20% from its value at the start of the plan.

6.50 % income if the FTSE does not fall more than 25%

The FTSE Quarterly Contingent Income Plan from Focus offers up to 6.50% each year, with a 1.625% income payment made at the end of each quarter provided the FTSE 100 Index closes at or above 75% of its value at the start of the plan – so it can fall up to 25% and you would still receive an income payment.

5.40% income if the FTSE does not fall more than 40%

Option 1 of Meteor’s Dual Option Contingent Income Plan offers a quarterly payment of 1.35% provided the FTSE at the end of each quarter has not fallen by more than 40% from its value at the start of the plan.

7.0% income provided the FTSE stays within an increasing range

The FTSE Range Income Plan pays 1.75% at the end of each quarter, provided the FTSE 100 Index closes between an upper and lower range based on its level at the start of the plan. This range starts at +/- 12% at the end of quarter one, and then increases by +/-0.75% each quarter finishing at a range of +/- 29.25% in the final quarter.

With all plans, if the FTSE falls outside of the level required at the end of each quarter, no income will be paid for that quarter.

Conditional capital protection

Another feature of these plans, which sets them apart from other capital at risk income investments, is the conditional capital protection. This means that your initial capital is returned in full at the end of the term provided the FTSE 100 Index has not fallen by 40% or more below its value at the start of the plan. This is measured at the end of the investment only and offers investors some capital protection against a falling stock market.

If the FTSE has fallen below this level, your original capital will be reduced by the same percentage as the fall in the Index. In this situation at least 40% of your initial investment would be lost, so you should understand that your capital is at risk and that you could lose some or all of your investment.

Risk versus reward

With savings rates continuing at record lows, the principle of risk versus reward means that the search for potentially higher income returns leads us to consider putting our capital at risk. A good benchmark for assessing an investment therefore 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 to your income and capital.

Anything around 2.75% is currently a top savings rate in the longer term fixed rate bond market and so by accepting risk to your capital, you have the opportunity to increase your income by up to 4.25% a year, depending on which income plan you invest in. The decision is therefore whether you are comfortable with putting your capital at risk and the conditional capital protection offered, in return for a potentially higher level of income.

Credit ratings and agencies

With structured investment plans your capital is used to purchase securities, normally issued by a bank (the counterparty), which are designed to produce the stated returns. This means their ability to be able to meet their financial obligations become an important consideration. This is known as credit risk and means that in the event of the counterparty going into liquidation, you could lose future income returns and some or all of your initial investment. These plans are also not covered by the Financial Services Compensation Scheme for default alone.

One accepted method of determining credit worthiness of a company is to look at credit ratings, issued and periodcially reviewed by independent companies known as ratings agencies. Standard and Poor’s is a leading credit agency and has attributed the following ratings to the counterparties used in the above plans (as at the start of their offer periods):

Plan Counterparty S&P rating
Focus Credit Suisse ‘A’ rating with a stable outlook
Mariana Natixis ‘A’ rating with a stable outlook
Meteor Natixis ‘A’ rating with a stable outlook

The ‘A’ rating denotes a strong capacity to meet its financial commitments and repay debts, whilst the ‘stable outlook’ indicates that the rating is not likely to change in the short to medium term (between 6 months and 2 years).

Fair Investment conclusion

Commenting on the current range of FTSE based income plans, head of savings and investments at Fair Investment Company Oliver Roylance-Smith said: “By combining the potential for a high level of income with some capital protection should the stock market fall, these plans could offer a compelling balance of risk versus reward when compared to other income alternatives available in the market.”

He continued: “With the opportunity for up to 7.0%, the headline yields are attractive for plans based on the performance of the FTSE whilst the cap on any income is balanced with the conditional capital protection included. Depending on what you think might happen to the FTSE in the coming years, there should be something here for every investor.”

Click here for more information on Meteor’s FTSE Dual Option Contingent Income Plan »

Click here for more information on the Focus FTSE Quarterly Contingent Income Plan »

Click here for more information on Mariana’s FTSE Range Income 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 legislation which are subject to change in the future. ISA transfer charges may apply, please check with your provider.

These are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Income payments are not guaranteed and 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.

Our 10 best last minute ISA ideas

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With just one week to go until the deadline for using your 2015/16 ISA allowance of £15,240, this really is your last opportunity to make use of this valuable tax break and help protect your returns from the taxman. If you are yet to make use of some or all of your allowance, here we give you our 10 best last minute ISA ideas. Including both Cash ISA and Investment ISAs, as well as opportunities where you can include your 2016/17 ISA allowance (£15,240) as well, there should be something for everyone.

1.   Our best-selling Investment ISA

For those looking for growth but also with the opportunity to mature early or ‘kick out’ each year, the Enhanced Kick Out Plan offers 11.50% for each year invested provided the FTSE 100 Index at the end of each year is higher than its value at the start of the plan (subject to averaging). Capital is at risk if the FTSE falls by more than 50%. This is our best selling Investment ISA during the current ISA season and also features a Double ISA option.  Click here for more information »

2.   Fixed income Investment ISA

The Enhanced Income Plan is a regular ISA season top seller, paying a fixed income of 5.28% per year regardless of what happens to the stock market. The plan also has monthly income payments, so you know exactly how much you will paid, when, and for how long. Capital is at risk if the FTSE 100 Index falls by more than 50%. This plan features a Double ISA option.  Click here for more information »

3.   Self-select Investment ISA top seller

Barclays Stockbrokers has been voted ‘Best Execution-Only Broker’ at the Shares Awards 2015 whilst they have also been voted Self Select ISA Provider of the Year 2016 at the ADVFN International Financial Awards. Their investment ISA offers over 2,000 funds as well as a wide range of other investments including shares, exchange traded funds, investment trust, gilts and bonds.  Click here for more information »

4.   Defensive Investment ISA best seller

The Defensive Growth Plan from Investec offers a fixed return of 36% (equivalent to 5.25% compound annual growth) plus a return of your original capital, provided the FTSE 100 Index has not fallen by 50% or more at the end of the investment term. If it has, no growth will be achieved and your capital will be reduced by 1% for each 1% fall. This plan also features a Double ISA option.  Click here for more information »

5.   Income Investment ISA top seller

The FTSE Quarterly Contingent Income Plan pays a quarterly income of 1.875% for each quarter the FTSE 100 Index does not end less than 25% below its value at the start of the plan. So even if the FTSE falls up to 25% each quarter, you would still achieve 7.50% annual income. Capital is at risk if the FTSE has fallen by more than 40% at the end of the investment term. This plan features a Double ISA option.  Click here for more information »

6.   Managed and regular saver Investment ISA

The Standard Life Stocks & Shares ISA includes their ‘Easy Option ISA’, which allows investors to invest in one of their MyFolio Managed Funds run by a team of experts at Standard Life Investment Ltd. You can manage your account online and your ISA can be opened from just £50 per month with transfers from other ISAs permitted.  Click here for more information »

7.   Defensive supertracker Investment ISA

Defensive plans remain popular and the FTSE Defensive Supertracker from Meteor tracks any growth in the FTSE during the plan term and then trebles it, subject to a maximum growth return of 60%. The plan is defensive since the growth is based on any rise above 80% of the FTSE’s value at the start of the plan – that’s a 60% return even if the FTSE ends the same. Capital is at risk if the FTSE has fallen by more than 40%. This plan also features a Double ISA option.  Click here for more information »

8.   Instant access Cash ISA

For savers looking to combine a top interest rate with access to their money at all times, the Easy Access ISA from AA offers a simple, bonus-free savings rate of 1.25% AER variable. The account can be opened and managed online with just £100 and there are unlimited free withdrawals. The account also accepts transfers in. There are no penalties, notice periods or tiered interest rates, whilst interest is calculated daily and paid in March each year.  Click here for more information »

9.   Fixed rate Cash ISA

If you are looking for the reassurance of a fixed savings rate and don’t need access for your money for at least a year, fixed rate Cash ISAs are a popular option. The 1 Year Fixed Rate Cash ISA from AA currently offers 1.35% AER fixed and can be opened with a single deposit of £500. The account also accepts transfers in. Withdrawals are not permitted and 90 days loss of interest will apply if you access your money during the fixed term. You can apply and manage your account online whilst interest is calculated daily and paid at the end of your 12 month fixed rate period.  Click here for more information »

10.  Help to Buy Cash ISA

First time buyers can benefit from a 25% bonus of their Help to Buy ISA balance with a minimum bonus of £400 (so you need at least £1,600 saved) and a maximum of £3,000 (on a savings balance of £12,000) although you can have more saved. That means for every £200 you save HM Government will add £50, up to a maximum of £3,000. Eligibility criteria and Help to Buy: ISA Scheme Rules apply. Also note that any funds withdrawn before closing the account will not count towards the Government Bonus. The Nationwide Help to Buy: ISA is currently offering 2.00% AER variable with a minimum opening balance of £1.  Click here for more information »

 

Click here to compare Cash ISAs »

Click here to compare Investment ISAs »

Click here to compare our Top 10 Investment ISA plans »

 

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. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. 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.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. The past performance of the FTSE 100 Index is not a guide to its future performance.

Some of the investments mentioned 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.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. ISA transfer charges may apply, please check with your provider.

2016 ISA season selections – our Top 5 Investment ISAs

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With well under a month to go, time is running out to maximise the valuable tax benefit of your ISA allowance before the deadline on 5th April 2016, otherwise it will be lost forever. This has already been a very busy ISA season, and with Cash ISA savings rates continuing at uninspiring levels, it is perhaps not surprising that last season’s rise in the number of Stocks & Shares ISAs is a continuing trend. With the need to review existing ISAs, as well as making sure any new ISA investments offer the opportunity for competitive returns, we bring you our most popular Investment ISAs.

Our Top 5 Selections

Below we have listed some of our most popular Investment ISA plans, featuring both income and growth investments. With income needs continuing to play a critical role for many investors, the attraction of having tax free income is understandable. Whilst for investors looking for growth, included are those plans which take a defensive view on the stock market, as well as investments with the opportunity to mature early or ‘kick out’. Our head of savings and investment, Oliver Roylance-Smith, also offers a Fair Investment view for each plan.

Your ISA allowance

The ISA allowance for the current tax year is £15,240, whilst all of the plans detailed below accept Cash ISA and Stocks & Shares ISA transfers. Each plan also offers a Double ISA option, whereby you can invest the current tax year ISA allowance and next tax year’s ISA allowance (2016/17 tax year ISA allowance is also £15,240) via one application form – thereby offering the opportunity to invest up to £30,480 into new ISAs. Please check the individual plan for further details and for any application deadlines that apply.

Potential for 11.50% annual growth

With the potential for double digit returns and the opportunity to mature early from year one onwards, the Investec Enhanced Kick Out Plan has been our best selling Investment ISA this year. The plan will return 11.50% annual growth (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 (subject to averaging). 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: “Depending on your view of what will happen to the FTSE, the ability to achieve 11.50% annual growth, even if the Index stays relatively flat, perhaps helps to explain why this plan has proved so popular. The current issue also sees the highest potential return on offer from this plan since 2012, 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.”

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Up to 7.50% annual income

The FTSE Quarterly Contingent Income Plan from Focus offers a quarterly payment of 1.75% during the plan if at the end of each quarter, the value of the FTSE 100 index has not fallen more than 25% from its value at the start of the plan. Therefore, the Index can fall up to 25% at the end of each quarter and you would still receive 7.50% annual income, but if the Index falls by more than this, no income would be paid for that quarter.

Your initial investment is returned at the end of the plan provided the FTSE has not 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, 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 headline yield of up to 7.50% is attractive and the cap on any income is balanced against the conditional capital protection thereby offering an attractive balance of risk v reward. It’s has been a while since we’ve been able to talk about the potential for up to 7.50% income from a plan based on the performance of the FTSE, and compared to other income alternatives available in the market, this plan could offer an attractive option.”

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5.28% fixed income each year

Our next plan is from Investec and is our best selling income investment this year, for both ISA and non-ISA investors. The current issue of the Enhanced Income Plan pays a fixed income of 5.28% per year, with monthly payments of 0.44% paid to you regardless of the performance of 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:One of the attractions of an ISA is that it allows income to be generated that would otherwise be subject to income tax, whilst the Enhanced Income Plan offers a high fixed income that is paid to you regardless of the performance of the stock market. Knowing exactly how much you will be paid, when and for how long are clearly features that could appeal, whilst the monthly payment frequency is usually the most sought after. The combination of a regular fixed income and a return of capital unless the FTSE 100 Index falls by more than 50%, could offer a competitive balance of risk versus reward that might be considered by both savers and investors.”

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36% return even if the FTSE falls up to 50%

Defensive plans offer investors a competitive return on their capital even if the stock market fails to go up. As a result, they have risen in popularity in the last few years and the recently launched Defensive Growth Plan from Investec is no exception. The plan offers a fixed return of 36%, provided the FTSE 100 Index at the end of the term, is more than half of its value at the start of the plan (subject to averaging). So the FTSE can fall up to 50% and you still receive a fixed growth return of 36%, equivalent to 5.25% compound annual growth. If the FTSE falls by 50% or more, no growth will be achieved and 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: “Whilst the FTSE continues at what are still historically high levels, it is understandable why many investors are considering defensive investment plans and with a product headline of a 36% growth return unless the FTSE 100 Index falls by 50% or more, the risk versus reward of this plan is relatively easy to understand. So depending on your view of what might happen to the FTSE in the medium term, the ability to produce over 5% compound annual growth provided the market does not fall 50%, could make for an innovative investment opportunity.”

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Triple the rise in the FTSE above 80% of its starting value

Following this defensive theme is our most popular ‘supertracker’ plan, the FTSE Defensive Supertracker from Meteor. The ‘supertracker’ part means your investment tracks any growth in the FTSE 100 Index during the term of the plan and then triples it, whilst the plan is ‘defensive’ since this growth is based on any rise above 80% of the FTSE’s starting value. Therefore, provided the FTSE has not fallen by more than 20%, you will receive triple any growth, subject to a maximum return of 60%. Therefore, this maximum return is achieved provided the FTSE ends the same or higher than its value at the start of the plan.

If the FTSE has fallen by more than 20%, no growth will be paid and your original investment will be returned in full unless the FTSE has fallen by more than 40%. If it has, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view: “For those investors concerned about the historically high level of the FTSE and would therefore like to include a defensive element to their investment, this plan offers the opportunity for investment level returns not only if the FTSE goes up, but also if it stays flat or even goes falls up to 20%. By combining this with some capital protection should the stock market fall, this plan could offer a compelling balance of risk versus reward for those who are not confident that the FTSE will rise significantly in the medium term.”

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Important reminder – why do an ISA?

One of the main reasons for using an ISA is it’s tax treatment since no tax is payable on the income you receive, or any capital gains that you make, and there is also no need to declare any ISA income or capital gains on your tax return. They therefore provide tax efficient income or growth on your investment, the benefit of which can be compounded over time. See our Top 10 Tips for ISA season for further help and tips on how to make the most from this important time of year. Please also note that with all of these investments, our experienced Investment Customer Services team is available on 0845 308 2525 to answer any questions you may have.

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.

Click here to compare Investment ISAs »

 

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 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.

These are structured investment plans which 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.

Investment Focus: Meteor 4 Year FTSE 4 Monthly Income Plan

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Updated: 14/08/2015

Income investments are some of our most commonly requested investment plans – whether it’s investors who want to use their ISA allowance to receive income, or people transferring existing investments in the quest for higher returns. If you are looking for a high level of fixed income and want to know exactly how much you will paid, when, and for how long, the 4 Year FTSE 4 Monthly Income Plan could offer a compelling investment opportunity.

Savers and investors face contrasting fortunes

Income is without doubt the most common demand put on our capital and this requirement commonly increases the older we get. As we start to reduce our working hours or look towards retirement, the objective of finding a competitive income stream from our investments becomes increasingly important. As we continue to face income pressure from sustained low interest rates and with future uncertainty around what the recently record-breaking FTSE might yield in the coming years, the balance of risk versus reward on offer from this plan is certainly worth a closer look.

In a nutshell

The Meteor 4 Year FTSE 4 Monthly Income Plan pays a fixed income of 7.32% each year, with monthly payments of 0.61% paid to you regardless of what happens to the stock market. The risk is that the return of your capital at the end of the four year term is based on the performance of four FTSE 100 shares – Rio Tinto plc, International Consolidated Airlines Group, Pearson plc and Aviva plc. If the value of the lowest performing share 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. You could therefore lose some or all of your initial investment. 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.
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Experienced Investor Section Proving Popular

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Here at Fair Investment Company there are a large number of our investors who decide to invest through us again and again and hopefully this has something to do with our customer service and the quality and relevance of our wide range of savings and investment products. This is also why in late 2012 we launched our experienced investor section. Here we take a closer look at what is driving more and more new and existing investors to this growing selection of investment ideas.

Existing investors – the inspiration

As a company, we have always looked at ways of providing innovative savings and investment ideas, which has often led to offering alternative opportunities alongside more traditional ways to save and invest. And as we approach our 15 year anniversary of helping a wide range of customers, we have never been more committed to finding ways to improve our site and make it easier for you to find and compare the latest investment offers, whilst also giving you plenty of ideas and product selections to help you identify whether they meet your needs.

Inspired by a rapidly growing number of existing investors who were seeking new investment ideas, our experienced investor section is now in its third year and continues to enhance our overall offering by featuring a range of innovative investment products. With the potential for very high growth returns and double digit income, this section is aimed at more experienced investors who are looking for a wider selection of top income and growth ideas and who are prepared to take a higher level of risk.

Fixed term investments

Many of our investors, both new and existing decide that an investment with a fixed term is the right way forward. This is why our most popular type of investment is the structured investment plan.

These plans offer a defined return for a defined level of risk, thereby offering an increased level of risk versus reward than better known investment fund. The return on offer is usually dependent on the performance of the stock market with the majority of plans available through Fair Investment being linked to an investment index such as the FTSE 100 Index, or a small number of listed shares, normally well known FTSE 100 shares. 
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