New Feature – Plan of the Month
This time last year we introduced our Top 5 Most Popular Investment Plans into our fortnightly newsletter. This has been so well received that we have now launched a new feature which looks back over the previous month and gives you what we consider to be our plans of the month across both savings and investments. This will appear in our first newsletter of each month.
Savers and investors
The plans featured will be spread across five different categories, two capital protected savings plans and three investment plans. Since new and existing visitors to Fair Investment include both savers and investors it is only right that we include both in our selections.
NISA friendly
Historically, most savers have considered Cash ISAs and investors have considered Stocks & Shares ISAs. The greater flexibility provided by the New ISA rules means that Cash ISAs can now be transferred to Stocks & Shares ISAs which opens up another option for savers facing the impact of historically low savings rates. It also means that there is a greater need to be clear about whether your capital is protected or at risk.
Any income or growth received from money held with an ISA is not then subject to tax, thereby resulting in the potential for attractive tax free returns. This is why wherever possible, each plan listed will be available both in and out of an ISA as well as accepting ISA transfers. Please make sure you check the individual plan details first though to check.
Categories
The five categories are as follows:
- Growth investment Plan of the Month
- Income investment Plan of the Month
- Kick Out investment Plan of the Month
- Savings alternative Plan of the Month
- Fixed rate bond Plan of the Month
From a fixed rate of return and capital protection, to putting your capital at risk for the potential of double digit growth returns, these five categories cover a depth of options for both savers and investors, seeking either income or growth.
Popular Plans
Whether this is the number of potential customers who have requested information on each of the plans, the numbers who have actually taken out the plan, or a combination of the two, each Plan of the Month featured will always come from a selection of our most popular plans.
Competitive rate or headline return
Since we have both savvy savers and well-informed investors who use our service, needless to say that being selected from our most popular plans means the rates of the plans listed will be competitive. Whether this is a market leading fixed rate or a strong headline yield, how they compare with other similar products available will also be a factor taken into consideration.
Current issue or new plan available soon
Since the best plans are only open for a relatively short period or can have their interest rate changed quickly, sometimes without notice, the plans included are either available at the time, or we are shortly due to launch a new version.
Our view
Finally, we also give your own view of each plan, brought to you by our Head of Savings and Investments, Oliver Roylance-Smith. Here we give you an independent view as well as try to help you understand what might be making the plan so popular, whether this is the return on offer or a particular feature.
July’s Plans of the Month
With the New ISA rules up and running, savings rates starting to show signs of moving on the back of interest rate speculation, along with the popularity of our Top 5 Most Popular Investment Plans, now seemed the perfect time to launch this new feature.
Growth investment Plan of the Month – over 3x any rise in the FTSE
A ‘supertracker’ tracks the Index, in this case the FTSE 100 Index, between the start date and end date, and then multiplies any growth by a number known at the outset, in this case 3.1. An additional feature of the Morgan Stanley FTSE Defensive Supertracker Plan is that the growth is based on any rise above 90% of the FTSE’s starting value, with a maximum return on your investment capped at 62%.
So, for example, if the FTSE falls 5% you would still receive 15.5%, whilst if it rose 5% you would receive 46.5% growth, along with a return of your initial capital. However, if the FTSE ends below 90% of its starting value, no growth will be paid and your original investment will be returned in full unless the FTSE has fallen by more than 50%. If it has, your capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.
Fair Investment view: “This plan should appeal to those who think the FTSE might rise in the coming years but not significantly, and who also want a defensive element to their investment.”
Click here for more information »
Income investment Plan of the Month – 7.5% fixed income
The FTSE 5 Monthly Income Plan from Meteor offers 7.50% annual income (paid as 0.625% each month) which is not only a high level of income, but it is also fixed and therefore paid to you regardless of what happens to the stock market. The trade off for such a high level of fixed income is that the return of your initial capital is dependent on the performance of five FTSE 100 shares rather the Index as a whole. Should the value of the lowest performing share be less than 50% of its value at the start of the plan, your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.
Fair Investment view: “This investment should appeal to income investors looking for a high level of fixed and regular income and if you invest within an ISA, the 7.50% fixed income is equivalent to 9.38% p.a. for basic rate tax payers and 12.50% p.a. for higher rate tax payers. However, the fact that the return of your initial capital is based on the performance of five shares rather than the Index as a whole makes this a higher risk investment and should be a key consideration.”
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Kick-Out investment Plan of the Month – Potential 10% annual growth
Fixed term investment plans that have the ability to mature early or ‘kick out’ each year seem to be particularly popular with investors when the market is at historically high levels, and the Enhanced Kick Out Plan from Investec offers the highest rate of any kick out investment based on the FTSE 100 Index. The plan will return 10% per year (not compounded) provide the value of the Index at the end of each year (from year 2 onwards) is higher than its value at the start of the plan – so although the FTSE does have to rise, this only needs to be by a single point. Your initial capital is at risk if the Index falls by more than 50% during the term and also finishes below its starting value, in which case your capital will be reduced by 1% for each 1% fall.
Fair Investment view: “Knowing how to invest when the FTSE is high continues to be a challenge for investors, but with the potential for high returns as early as year 2, even if the FTSE only rises by a single point, perhaps helps to explain why this is one of our best selling kick out plans. The combination of high growth potential and the ability to mature early could make for a compelling opportunity in the current market.”
Click here for more information »
Savings alternative Plan of the Month – Potential 4.5% p.a. income
The Target Income Deposit Plan from Investec offers 4.50% each year provided the value of the FTSE 100 Index at the end of each year is higher than 90% of its value at the start of the plan (subject to averaging). If the Index finishes below 90%, no income will be paid for that year. Should it meet the required level on any future anniversary, any missed payments will be added back.
Fair Investment view: “With the recent spike in inflation eating into historically low savings rates and our leading longer term fixed rate only offering 3.11%, this could be an attractive alternative for those prepared to sacrifice a guaranteed return in the hunt for higher potential income.”
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Fixed rate bond Plan of the Month – 3 Year Base Rate Plus, 2.60% AER minimum
With the increase in the Consumer Price Index to 1.90% and the talk of interest rate rises, Investec has shown some innovation with the 3 Year Base Rate Plus plan. The account pays 1% AER/variable above the Bank of England Base Rate but with a minimum rate of 2.60% AER, so whatever happens you know you will never earn less than this. Interest is not compounded and will be paid into your nominated account annually. No early closure or withdrawals are permitted.
Fair Investment view: “Although not exactly a fixed rate bond in the traditional sense, the minimum guaranteed rate of 2.60% acts in the same way and is competitive compared to other three year fixed rates in the market. This plan has proved very popular with savers looking for a guaranteed return, capital protection, along with some potential upside should interest rates go up.”
Click here for more information »
Click here for more information about the Morgan Stanley Defensive Supertracker Plan »
Click here for more information about the Meteor FTSE 5 Monthly Income Plan »
Click here for more information about the Investec Enhanced Kick Out Plan »
Click here for more information about the Investec Target Income Deposit Plan »
Click here for more information about the Investec 3 Year Base Rate Plus account »
No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular plan. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek independent financial advice.
Always check whether any charges apply on transfer and remember that the preferential tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future.
The alternative savings option referred to in this article is structured deposit plan that is capital protected. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial capital and any stated returns. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.
The investments referred to are structured investment plans are not capital protected and there may be the risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated, in which case you may not be entitled to compensation from the Financial Services Compensation Scheme (FSCS). In addition, you may not get back the full amount invested if the plan is not held for the full term. The past performance of the FTSE 100 Index and any of its shares is not a guide to their future performance.
AER – Stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
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