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New plan ‘typifies benefits of using structured products’

26 March 2018

Second tranche of structured product offers 4% every 6 months if the FTSE 100 is above 92% of strike point, with a maximum term of 8 years.

Investec and Lowes Financial Management have joined forces on the second issue of the 8:8 Plan, offering investors a potential 8% gain for each year the investment is held, provided at the maturity date the FTSE 100 is above 92% of its level at the investment’s start point.

Ian Lowes, Managing Director of Lowes Financial Management and founder of CompareStructuredProducts.com, said: “People ask why they should use structured products and, in my view, this plan typifies the benefits of doing so. When we launched the 8:8 Plan in January, I said it was a compelling offering that set the bar for the structured product sector in 2018. With this issue I feel we have pushed that bar higher.

“It is offering potential for a decent 4% return every 6 months (8% per annum), not just if the market goes up but if it has fallen by up to 8%. It also protects capital on the downside unless the FTSE 100 falls more than 40% – i.e. on a starting level of 7,200, the FTSE would have to fall to 4,320 before the investor lost capital.”

The Plan offers a higher pay out by 0.25% per six-month period on the initial issue in January, a result of market volatility.

Lowes continues: “Pundits are predicting a severe market correction, although no one relishes the prospect. If such a correction comes soon, one of the benefits of the eight-year maximum period of the Plan is that it provides a longer time horizon for the index to recover, all the time accumulating potential gain for the investor.”

The Plan terms

The Plan has a maximum eight-year term but is designed to mature from the second year onwards. It has the possibility to mature every six months from the second anniversary (20 April 2020), accumulating 4% for every six months held.

It is this six-monthly observation date that increases the opportunity for the plan to deliver for investors.

So, for example: If the FTSE 100 is at 7,200 on the start date, 18 April 2018, as long as by the second anniversary, 20 April 2020, the FTSE 100 is above 6,624, investors will receive 16% return on their capital. If the FTSE 100 is at or below 92%, the Plan continues until 19 October 2020. At that point, if the FTSE 100 is above that level, then the investor gets back their capital and a 20% return.

The investment continues until it matures or reaches the last observation date, on 20 April 2026. If the Plan has not matured by that date, then as long as the FTSE 100 is above 60% of the starting level on that date the investor will receive their capital back but no return. If the index has fallen below 60%, then capital is reduced in line with the fall in the index at maturity on a 1% for 1% basis.

The counterparty to the investment is Investec Bank Plc and returns, including return of capital, are dependent on the bank remaining solvent. Capital may be lost if Investec Bank Plc becomes insolvent.

Key dates:

The Plan is now open for investment

Closing date (2017/2018 ISA): 5 April 2018

ISA transfer deadline: 20 March 2018

Direct/SIPP deadline: 10 April 2018

2018/2019 ISAs deadline: 10 April 2018

Strike date: 18 April 2018

First observation date: 20 April 2020

Maturity date: 20 April 2026

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