HSBC Bank is to re-enter the structured product market with a bond that offers rising income over a ...
HSBC Bank is to re-enter the structured product market with a bond that offers rising income over a five year period.
The bond, called Fixed Income 7, will be available through an Isa although exact details of the nature of the wrapper are yet to be confirmed. Income, which will be paid out in the form of quarterly dividends, will start as just below 5% pa rising to just under 8.25% in the final year of the product's life.
The level of income will remain constant for four quarters before rising, and although the product is linked to the performance of the FTSE 100, the income rises are guaranteed. Investors will receive 100% of their capital back should the level of the FTSE be higher at the scheduled end date than it is on the start date.
Should the index level be lower than the level at the start date, then capital is lost on a straightforward one for one basis with a 10% drop in the index matched by a 10% drop in return of capital.
The measurement of the index level at the end of the product's life will be a straightforward reading on a specific date rather than an average taken over three months or more as is sometimes the case with this kind of product. Intermediary commission will be 3% with a minimum investment of £3,000.
On investments in excess of the Isa allowance ceiling of £7,000, tax is payable on income payments received on the portion outside the wrapper.
It will be marketed though intermediaries and through HSBC's high street branches.
The bond is backed by a derivative based around medium term notes issued by companies with an S&P rating of A and above, a typical example of which would be a note issued by a high street bank such as Barclays or Lloyds TSB.
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