Investment house Nvesta is launching a high risk accelerator growth plan which is linked to the perf...
Investment house Nvesta is launching a high risk accelerator growth plan which is linked to the performance of the FTSE 100 but has the potential to return up to 72% over the original capital after six years.
Returns and maturity of the structured product are dependent on the speed of growth on the FTSE 100, as the policy will mature if the index cumulatively climbs 6% or more each year.
If on the first anniversary date the plan has risen by at least 6% from the initial level set on 22nd August 2003, for example, the plan will mature with the original capital returned plus 12%.
But if it does not rise by more than 6% on its first anniversary, the plan will continue its second anniversary when the plan could mature if has then risen by 12% or more.
If that happens, the investor will receive their original capital back with capital gains of 24%, so the ideal scenario is to see the index rise by just under 6% each year, and then climb to a 36% rise or more in the sixth year, as this would return original capital plus 72% by August 4, 2009.
There are pitfalls, however, as capital protection, despite suggestions from Nvesta, is not guaranteed.
A 40% "downside protection level" is imposed, so if the FTSE 100 falls below that level policyholders could lose a substantial chunk of their original capital.
Even if the final investment level is only a fraction below the initial when the policy matures, the original capital will be reduced by 1% for every 1% lost on the FTSE.
Business development director Anthony Green says the FTSE 100 would need to fall from 4,100 - roughly around today's level - to under 2,500 for such a rule to come into play.
Extra allocations of 0.25% are offered for investments of between £25,000 and £49,999, climbing to 1.5% for all sums up to £1m.
Minimum investment is £3,000 up to a maximum of £2m and interest will be paid as enhanced shares.
Closing date for investment is August 8th, 2003 for mini or maxi Isas and Direct investments with Pep and Isa transfers closing one week earlier.
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