NFU Mutual launches 5% income bond
Insurance specialist NFU Mutual has launched a six-year investment bond with a guaranteed annual income of 5%.
The FTSE 100-linked structured product is open to applications until the 24 June, or earlier if fully subscribed.
A £50,000 investment would generate an income of £2,500 a year, payable in quarterly installments of £625.
In addition, investors who subscribe before 5 June benefit from an extra 0.25% bonus, while investors with more than £150,000 will benefit from an enhancement of 0.5%. This rises to 1% if investors subscribe £250,000 or more.
However, while the annual income is guaranteed, the original investment isn't as the bond is linked to the performance of the FTSE 100.
If the index drops by more than 49% over the six-year term, the original capital won't be guaranteed.
Chris Linpow, personal finance specialist at NFU Mutual, says: "It's especially difficult at the moment for people to find a reliable return on their money. But this new bond will provide our customers with a guaranteed quarterly income from their investment."
He highlights that these types of structured investments are not suitable for every investor, as they must be prepared to take risk with their money, hence the bond is only available through NFU Mutual consultants.
The counterparty is NFU Mutual.
This article was written for Money Observer
Issued by life companies and designed to produce medium- to long-term capital growth, but can also be used to pay income. The minimum investment is typically £5,000 or £10,000 and your money is invested in the life company’s investment funds, so the bond can either be unit-linked or with-profits. They offer a number of tax advantages, such as the ability to withdraw up to 5% of the original investment amount each year without any immediate income tax liability. Also, a number of charges and fees apply, such as allocation rates, initial charges, annual charges and cash-in charges. As investment bonds are technically single-premium life insurance policies, they also include a small amount of life assurance and, on death, will pay out slightly more than the value of the fund.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.