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Norwich Union

Type: Norwich Capital Protected Plan

Description: NU has introduced a three-year plan and a six-year plan, both of which guarantee to return the initial investment plus two-and-a-half times the percentage rise in the FTSE 100 Index, with a cap on the return possible. The minimum investment is £1000, with no maximum amount, although Isa rules apply. The underlying financial instrument is a medium term note, which means that should the company that backs the note go into liquidation, investors could lose all of part of the money.

Conditions: The total return is capped at 24 per cent growth in the FTSE 100 Index for the three-year plan, and at 60 per cent for the six-year plan. The six-year plan can be invested within an ISA wrapper.

Contact: www.norwichunion.com/

VERDICT

While no-one can call the FTSE 100 Index, most economists are predicting continued volatility for the next 12 to 18 months and with a recession on the cards, a short-term downturn is likely. If that occurs, it could significantly hinder the returns on the three-year fund especially considering that it is capped at 24 per cent growth. However, if clients are looking for UK equity exposure and want to ride out any volatility safe in the knowledge that their capital is protected, then the six-year product may be suitable. That said, some clients may prefer to have the capital protection apply for three-years to ride out the short-term expected volatility and then to take those returns and invest directly into the FTSE when the economic outlook is hopefully clearer, to benefit from 100 per cent of any increase, without an cap. For the risk-averse investor, the financial strength of the medium term note provider is crucial and a factor that would need consideration given the current economic climate.

Rating: 3/5