With less than a month to go, time is running out to maximise the valuable tax benefit of your ISA allowance before the deadline on 5th April 2015 – otherwise it is gone forever. The ISA allowance for the current tax year is £15,000. For those looking to use some or all of this allowance, or perhaps transfer existing Investment ISAs, our head of savings and investment, Oliver Roylance-Smith, selects his top 5 growth investments for this ISA season.
9.50% each year, even if the FTSE stays relatively flat
The Enhanced Kick Out Plan from Investec offers the highest rate for an investment based on the FTSE 100 Index and will return 10.50% per year (not compounded) provided the value of the Index at the end of each year 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.se 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 the potential for double digit annual returns even if the FTSE only rises by a single point, perhaps helps to explain why this was our best selling kick out plan in 2014. The combination of high growth potential and the ability to mature early could make for a compelling opportunity in the current market.”
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3.2 x any growth in the FTSE above 90% of its starting value
The FTSE Defensive Supertracker Plan from Morgan Stanley offers a return linked to any rise in the FTSE 100 Index over the six year term, which is then multiplied by 3.2, subject to maximum growth return of 64%. The main feature of this plan is that the growth is based on 90% of the FTSE’s starting value, so the returns you could achieve are as follows:
FTSE falls 10% or more: no growth
FTSE falls 5%: 16% growth
FTSE ends the same: 32% growth
FTSE rises 5%: 48% growth
FTSE rises 10% or more: 64% growth
If the FTSE has fallen by more than 10% on the end of the plan, 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 could be a compelling opportunity for investors concerned about the historically high level of the FTSE and would therefore like to include a defensive element to their investment with the maximum return of 64% being achieved provided the FTSE rises by at least 10%. By receiving well over three times any rise in the Index, the plan also offers investors the opportunity to beat the stock market.”
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7.75% each year, even if the FTSE falls up to 10%
The Investec Defensive Kick-Out Plan arguably offers the best of both worlds by combining the potential for investment level returns even if the stock market falls up to 10%. The investment has a 7.75% headline return and will kick out at the end of each year, from year two onwards, provided the FTSE 100 Index finishes above 90% of its value at the start of the plan. The plan’s conditional capital protection means that your initial investment is returned in full unless the FTSE 100 falls by more than 50% at the end of the 6 year term. If it is, your initial capital will be reduced by the same amount as the fall in the Index, so you could lose some or all of your initial investment.
Fair Investment view: “As the FTSE recently reached its highest level on record, it is understandable that investors may be thinking twice before committing their capital. For those investors who are not confident that the FTSE will continue to rise, or would like the potential for a competitive return even if it falls up to 10%, this plan could offer a compelling balance of risk versus reward.”
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Potential for 9.1% annual growth even if the FTSE stays the same
The SG UK Kick-out Plan (UK Four) Issue 14 will mature early or ‘kick out’ provided the FTSE 100 Index closes the end of each year (from year 2 onwards) at or above its level at the start of the plan. If it does, the plan will end returning your original capital plus 9.1% for each year invested – that’s a potential 18.2% in just two years.
If the Index closes below the required level each year, no growth return will be paid and your initial capital will be returned in full unless the FTSE falls by more than 50% during the investment term and also finishes below its starting value. In this situation your initial investment would be reduced by 1% for each 1% fall and so you could lose some or all of your investment.
Fair Investment View: “Most of us would agree that if we received a return of 9.10% for each year invested, especially if the market had remained flat, this would be considered a good return from our investment – which is exactly what is on offer from this plan. Balanced with the conditional capital protection and this could be a timely opportunity.”
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Experienced Investors – Potential 24% growth in 2½ years, linked to the price of oil
For experienced investors looking for innovative investment ideas, the Crude Oil Kick Out Supertracker from Meteor (Morgan Stanley acting as counterparty) offers two opportunities for high returns, both linked to the performance of crude oil. Your return is dependent on the performance of the S&P GSCI Crude Oil Excess Return Index (the Index), with the value of the Index being taken at the start of the plan. If its value is at or above this level after two and a half years, investors receive their original capital back along with a growth payment of 24%. If it is lower, the plan continues to the end of the five year term and your return is equal to 1.5 times any growth in the Index, with no upper limit.
If the Index is lower at the end of the term, you will not receive any growth and your initial investment is returned unless the Index has fallen by more than 50% at any time during the term. If it has, and the Index also finishes below its starting value then 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: “The price of oil has been much publicised in recent months and this plan offers two opportunities for high returns – halfway through the investment and at the end of the term – and with no upper limit should the plan run its full five year term, this plan could appeal to experienced investors seeking a high level of growth from their capital. However, capital is at risk if the underlying Index falls by more than 50% and as the price of commodities can move by a wide margin, this plan should be considered a higher risk investment than one based on equity indices such as the FTSE 100 Index.”
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Compare experienced investor plans »
Compare Top 10 NISA investments »
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 investment. Different types of investment carry different levels of risk and may not be suitable for all investors. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
Tax treatment of ISAs depends on your individual circumstances and legislation which are subject to change in the future. ISA transfer charges may apply, please check with your provider.
Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Any returns on your investment is not guaranteed and there is a risk of losing some or all of your initial investment due to the performance of shares listed on the FTSE 100 Index or the S&P GSCI Crude Oil Excess Return Index. As the price of commodities can move by a wide margin plans based on the performance of the S&P GSCI Crude Oil Excess Return Index represent a higher risk investment than those based on equity indices (such as the FTSE 100 Index).
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 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 S&P GSCI Crude Oil Excess Return Index and the FTSE 100 Index is not a guide to their future performance.
