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Home > Investments > Structured Products

Six-year plan strives to double rise of FTSE 100

Cater Allen has offered investors the chance to double the rise of the FTSE 100 in the next six years, with a maximum return capped at 45 per cent.

By Iona Bain | Published Jul 12, 2012 | comments

The private bank, part of the Santander group, has launched a structured product designed to give investors 200 per cent of the growth of the FTSE 100 for a six-year term.

The plan will return up to 45 per cent, equivalent to 6.29 per cent AER, if the FTSE 100 rises, while investors will get their full capital back if the index falls.

The final level of the plan will be calculated by averaging over 13 set dates in the last year of the plan.

Cater Allen said the use of averaging at the end of the plan should smooth the performance of the FTSE 100. The firm admits this could impact on obtaining better returns in a bullish market, but said it should come into its own when markets start to fall.

For example, if an investor deposits £20,000 in the plan and the FTSE 100 goes up by 25 per cent, subject to averaging, the investor will receive a maximum of £9000.

Investors can also earn an extra 0.5 per cent on their funds in an ‘early bird’ offer by investing their funds prior to the commencement date of the plan on 6 September. This is completely tax-free if the funds are invested through a cash Isa.

The minimum deposit required for the plan is £5640.

However, any money that is not held in an Isa or Sipp will be liable for income tax when the plan matures.

Steve Waterhouse, director of Greater Manchester-based Waterhouse Financial and Mortgage Solutions, said: “With many clients still somewhat cautious about investing directly in the equity markets, this allows exposure to these markets while protecting their initial capital investment. This offers a great balance between wealth preservation and potential gains.”

Alistair Cunningham, director of Surrey-based Wingate Financial Planning, said his general policy was to avoid structured products, and this plan is not likely to change his mind.

He said: “You should really expect below 6 per cent, which is only a modest amount above cash. Plus the counterparty risk is held by Santander, which would cause me a lot of worry. No doubt about it, you are taking risk here with the possible outcome that you could lose some or all of your money.”

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