Investment ISAs

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Best seller from 2018 offering potential 6.4% pa

 “It would seem the best way to kick off the New Year would be to take a closer look at our most popular plan from 2018, especially since the headline interest rate on offer is as high as it’s ever been before.

The plan has a maximum term of 8 years, but also offers the opportunity to receive your initial capital back in full before then, if the FTSE has risen by more than 5% at the end of each year, from year 2 onwards. If the plan does not end early, your initial capital is returned in full provided the FTSE has not fallen by more than 40% at the end of the plan term. If it has, your capital will be reduced by 1% for each 1% fall, so your capital is at risk.

There is also a second option paying 5.1% per year interest (1.2% per quarter) unless the FTSE falls 40%, and so whether you are defensive, or ‘super defensive’, the plan still offers the opportunity for high interest.”

More details  »

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Monthly Income Plan Offer...

Is inflation really a factor when deciding what level of income you would like to achieve from your capital?

Or perhaps it is the combination of the potential income and the possibility of any capital growth or decline in value that is our benchmark? Either way, how much income an investment might generate, when you might get paid, and the potential risk to your capital, would seem to be the obvious considerations when assessing any sort of income producing investment. And whilst inflation remains at a five year high of 3%, it is likely that if it wasn’t on your radar already, it is now.

Against this challenging economic environment, we take a look at the latest edition of  Meteor’s FTSE Monthly Contingent Income Plan, which offers the potential to receive a high level of income that could counter the adverse effects of inflation over the medium term.

Plan summary

The Meteor FTSE Monthly Contingent Income Plan gives investors the chance to receive a monthly income of up to 0.45%, which equates to 5.4% annual interest. 

Investors receive the opportunity for income payments each month, and the plan has a fixed term of 10 years.

Although the plan is designed to continue for the full 10 years, it also has the ability to mature before the full term (known as ‘kicking out’) at the end of each quarter from year 2 of the plan onwards.

FTSE linked

The plan has the potential to provide 5.4% interest each year, but whether an income payment is made or not is dependent on the performance of the FTSE 100 Index (‘the Index’ or ‘the FTSE’). In addition to the level of income achieved, the performance of the FTSE also determines the treatment of your initial capital at the end of the investment term.

The FTSE 100 Index tracks the share prices of the 100 largest companies listed on the London Stock Exchange, and is widely recognised as the proxy benchmark for most investment managers, especially those investing predominantly in UK equities.

Potential for high interest

The latest version of the plan offers investors the opportunity to receive a monthly return of 0.45% (5.4% annually), provided the value of the FTSE 100 Index at the end of the month has not fallen by more than 40% below its level at the start of the plan. 

Therefore, provided the FTSE stays at or above 60% of its starting level for the entire year, then the annual return on the investment would 5.4%, which is double the current rate of inflation (2.4% as at March 2018).

Some capital protection from a falling market

In addition to the amount of income paid, the treatment of the investor’s original capital is also dependent on the performance of the FTSE, and so this investment puts your capital at risk.

The plan does offer some capital protection from a falling market since your initial investment will only be reduced if, at the end of the plan, the FTSE has dropped by more than 40% below its value at the start of the plan.

Therefore, the FTSE could fall by up to 40% of its starting value and the invested capital will still be returned in full. But if the FTSE falls by more than this, the invested capital is reduced by 1% for each 1% fall.

For example, if the FTSE fell by 41% then the investor would lose 41% of their capital. You should therefore only consider this investment if you are prepared to lose some or all of your initial investment.

Kick out (early maturity)

Although the plan has a maximum term of 10 years, after 2 years it has the ability to “kick out” or mature early every quarter. This feature is also dependent on the performance of the FTSE, as the plan will only mature early if the Index has risen by 5% or more above its value at the start of the plan.

In the event that the plan does mature early, the initial investment is returned in full along with a final monthly income payment, at which point the plan comes to an end.

Monthly Payments

The plan offers the potential for an income payment each month, dependent on the closing level of the FTSE on the relevant monthly measurement date.

The monthly return of 0.45% will be paid to the investor if the Index is at or above 75% of its level at the start of the plan. Therefore, the FTSE can fall up to 40% and income will still be paid. If the FTSE falls more than 40%, no income is paid for that month, and the next opportunity to receive income would be the next monthly measurement date.

Defined risk and defined returns

One of the reasons investment plans such as these are popular with our investors, is that the potential returns are stated up front, whilst the investor also knows at the outset in what circumstances their capital is at risk.

These defined returns for a defined level of risk, allow potential investors to weigh up whether they are prepared to put their capital at risk in return for the potential monthly interest on offer.

ISA friendly

As well as non-ISA investments, this income investment is available as a new ISA up to the current limit of £20,000, and also accepts transfers from both Cash ISAs and Stocks & Shares ISAs.

Our conclusion

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at ISA.co.uk, said:

“With inflation rapidly becoming a thorn in every investor’s side, not least those seeking an income from their capital, the ability to achieve up to twice the current rate of inflation, even if the FTSE falls up to 40%, is certainly worth a closer look. Combined with some capital protection against a falling stock market, and the defined returns, defined risk on offer could be appealing for a wide range of investors.”

Click here to view the Meteor FTSE Monthly Contingent Income Plan »

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. 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 is based on current law which may be subject to change in the future. ISA transfer charges may apply, please check with your provider.

This is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is 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 FTSE 100 Index is not a guide to its future performance.

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What is a stocks and shares ISA?

Unlike a cash ISA - which is a straightforward tax-free savings account - a stocks and shares ISA allows you to invest money up to a certain amount without paying tax. This runs from 6 ^th April each year, check the main page to see the current ISA maximum allowance.

A stocks and shares ISA allows you invest your tax-free allowance while only paying 10% tax on any investment income you make. This can add up to a substantial saving when you consider that, on dividends paid on a non-ISA investment, an additional rate taxpayer would have to part with 42.5% in tax.

You have a variety of options when it comes to using your stocks and shares ISA allowance. You can:

• Invest your full ISA allowance in a stocks and shares ISA.
• Use your stocks and shares ISA allowance for shares - excluding shares traded on the Alternative Investment Market (AIM) - unit trusts, investment trusts, open-ended investment companies (OEICs), life insurance policies, corporate bonds, and gilts.

Are you ready to invest in a stocks and shares ISA?

A stocks and shares ISA, as with all investments, involves an element of risk, so it's important that you're in a sufficiently stable financial position. Before you open a stocks and shares ISA, make sure that:

• Your debts are under control - you've either paid them off or have affordable arrangements in place to do so.
• You have emergency savings that you can access easily if something unexpected occurs - if your car breaks down or you're made redundant, you'll need savings that you can use straight away.

If you're very new to saving and don't yet have a basic emergency fund, you may find that a cash ISA is more suitable for you at this stage. Once you've built up some accessible savings in this way, you might then want to consider a stocks and shares ISA, too.

Top ten things to consider when choosing a stocks and shares ISA

• You should be prepared to invest for the medium to long term with a stocks and shares ISA - for example, for five years or more.
• If you think you might require access to your cash in the next couple of years, a stocks and shares ISA may not be the right choice for you. Share prices can be very variable - especially in the current financial climate - and so if you were to withdraw your investment in the next twelve to eighteen months, you could end up with less money than you started with.
• Different stocks and shares ISAs have different investment options. These range from £50 per month (e.g. through a fund) to a specified minimum investment (e.g. £1,000).
• Some ISA providers will give you online access to your account, allowing you to see the investment performance of your ISA and keep up to date with any charges incurred.
• If your stocks and shares ISA isn't performing as well as you'd like, you will usually be permitted to transfer it another provider. To do this, speak to your new ISA manager who will arrange the transfer, allowing you to avoid losing any tax benefits by withdrawing your cash.
• You can transfer shares you get from an HMRC-approved SAYE (save as you earn) scheme run by your employer, or a share incentive plan, into a stocks and shares component of an ISA without incurring capital gains tax, up to your annual ISA allowance.
• You will not be able to transfer any existing non-ISA shares, or shares you've inherited, into a stocks and shares ISA.
• With a stocks and shares ISA, there is greater long-term growth potential than a cash ISA - however, bear in mind that the value of your investment can go down as well as up.
• If you have a stocks and shares ISA from a previous tax year, you're permitted to move this into a current stocks and shares ISA or split it between more than one stocks and shares ISA.