Scottish Mutual is to launch a five-year structured product providing income and capital growth opti...
Scottish Mutual is to launch a five-year structured product providing income and capital growth options.
Available from 1 October to 9 December, unless fully subscribed earlier, the Choice Income Bond offers 5% annual or 0.4% monthly income net, equivalent to 6.25% and 0.5% gross respectively, or 26% net growth at the end of the term, equivalent to 32.5% gross.
Linked to the performance of the FTSE 100, investors will receive back their initial capital in full provided the index does not drop more than 40% from the initial level during the tracking period and the final level is not lower than at the outset.
If the product fails both of these criteria, the capital will be reduced by the percentage by which the final index has fallen since the outset of the product's life. There is no minimum capital return with this product.
The initial index level is taken at close of business on 17 December 2003 and the tracking period runs from 18 December 2003 to 1 December 2008.
The final level is the average of the closing index readings from 2-15 December 2008 inclusive. The bond offers a bonus for early investment, payable at maturity, with an additional 0.4% of initial sum available for payments received on or before 21 October and 0.25% for those received on or before 11 November.
There are also death benefits included, with a maximum of two lives assured. If the life assured dies before 17 December 2003, only the original investment will be returned in full. If it happens on or after that date, the bond pays 101% of the surrender value on the date Scottish Mutual is informed of the death.
Payments are made net of basic rate tax from Scottish Mutual's taxed funds. Non and basic rate taxpayers will have no further tax to pay and the 5% deferral rule means higher rate taxpayers will have no further tax to pay on all income until the maturity date.
The minimum investment is £10,000 and maximum £25,000. The plan charges are included in the terms. Intermediary commission is 3%. Advisers can choose to waive this, effectively increasing the amount invested and the capital return.
To avoid a chargeable event for such a small amount, however, the income payments will not be increased. Instead, there is a bonus payment at maturity.
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