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Investment Type
Investments are categorised as follows:
- Growth - those investments designed to potentially provide growth
- Income - those investments designed to potentially provide income
- Growth & Income – those investments designed to potentially provide a combination of both growth and income
- Auto-Call / Kick-Out – those investments which have the potential to mature on pre-determined anniversary dates
- Growth with Auto-call – Growth investments which also have the potential to mature on a pre-determined anniversary date.
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Product Type
Products are categorised as follows:
- Capital at Risk: Those products that are designed to put some or all of the investor’s capital at risk if the underlying index falls below a certain level
- Capital 'Protected': Those products that are designed to ensure that an investor will only lose capital in the case of counterparty default
- Deposit Based: A fixed term deposit account in which some or all of the investor’s capital may be covered by the FSCS.
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Index Link
The underlying measurement to which returns are linked.
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Term
The investment term stated in the product literature. There may however be some additional weeks between the date on which the offer ends and the start date and also between the final investment date and the maturity proceeds distribution date.
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Counterparty
When investing in a plan of this type, the capital will, in effect, be loaned to a financial institution known as the 'counterparty'. The return of capital will be dependant upon the continued solvency of the counterparty throughout the term of the investment, therefore the capital will be at risk from the date of investment. Before proceeding, investors must be aware that should the plan's underlying counterparty file for bankruptcy during the term of the plan, or be unable to repay its liabilities, some or all of the capital invested may be lost. As with all investments, it is imperative that those who wish to invest in a plan of this type read the plan brochure and terms and conditions thoroughly and understand the risks involved before proceeding.
Deposit Taker
When investing in a structured deposit, the capital will be placed in a fixed term deposit account held with a financial institution known as the 'deposit taker'. The return of capital will therefore be dependant upon the continued solvency of the deposit taker throughout the term of the investment. Before proceeding, investors must be aware that should the deposit taker file for bankruptcy during the term of the plan, or be unable to repay its liabilities, some or all of the capital invested may be lost. Investors may, however, be eligible for cover provided by the Financial Services Compensation Scheme (FSCS) up to a certain amount of their investment. The availability of such compensation is defined under the terms of the FSCS, and certain investment limits will apply. As with all investments, it is imperative that investors read the plan brochure and terms and conditions thoroughly and understand the risks involved before proceeding.
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Collateralised
To help protect against the risk of counterparty default, collateral up to the value of the investment at any time will be deposited with an independent custodian.
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S&P Rating
The financial strength of the Counterparty, as rated by Standard & Poor's, a leading Credit Rating Agency for financial institutions worldwide. Standard & Poor's provides both short-term and long-term credit ratings, rating institutions on a sliding scale from 'AAA' to 'D', where 'AAA' denotes the highest level of financial strength and 'D' the lowest. Intermediate ratings are also offered at each level within the major categories between AA and CCC, sometimes with the inclusion of a '+' representing the higher end of the category, or '-' representing the lower end of the category.
AAA - The highest rating assigned by Standard & Poor's. The capacity of the financial institution to meet its financial commitments is considered to be "extremely strong" (the world's major companies and governments);
AA - The capacity of the financial institution to meet its financial commitments is considered to be "very strong";
A - The financial institution is more susceptible to the adverse effects of circumstantial and economic changes than those financial institutions appearing in higher-rated categories. However, the financial institution's capacity to meet its financial commitments is still considered to be "strong";
BBB - Adverse economic conditions or changing circumstances are more likely to lead to the financial institution having a weakened capacity to meet its financial commitments. However, the capacity to meet financial commitments is still considered to be "stable".
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Fitch Rating
The financial strength of the Counterparty, as rated by Fitch Ratings, the smallest of the three major Credit Rating Agencies (Standard & Poor's and Moody's the other two). Fitch Ratings provides both short-term and long-term credit ratings; rating institutions on a sliding scale from 'AAA' to 'D', where 'AAA' denotes the highest level of financial strength and 'D' the lowest. Intermediate ratings are also offered at each level within the major categories between 'AA' and 'CCC', sometimes with the inclusion of a '+' representing the higher end of the category, or '-' representing the lower end of the category. Fitch Ratings's generic long-term credit ratings are explained below.
AAA - Highest credit quality. Such ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly likely to be adversely affected by foreseeable events.
AA - Very high credit quality. Such ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A - High credit quality. Such ratings denote expectations of low default risk. The capacity for payments of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB - Good credit quality. Such ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
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Moody's Rating
The financial strength of the Counterparty, as rated by Moody's Investors Service, a leading global credit rating, and research and risk analysis firm. Moody's publishes both short-term and long-term credit ratings, rating institutions on a sliding scale from 'Aaa' to 'Caa', where 'Aaa' denotes the highest level of financial strength and 'Caa' the lowest. Moody's includes numerical modifiers '1', '2' and '3' to each generic rating classification from 'Aa' and 'Caa'. The modifier '1' indicates that the obligation ranks in the higher end of its generic rating category; the modifier '2' indicates a mid-range ranking; and the modifier '3' indicates a ranking in the lower end of that generic rating category. Moody’s generic long-term credit ratings are explained below.
Aaa - The highest rating assigned by Moody's. The financial institutions' obligations are judged to be of the highest quality, with minimal credit risk.
Aa - The financial institutions' obligations are judged to be of high quality and are subject to very low credit risk.
A - – The financial institutions' obligations are considered upper-medium grade and are subject to low credit risk.
Baa - The financial institutions' obligations are subject to moderate credit risk, considered medium-grade and as such may possess certain speculative characteristics.
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Tax Treatment if held outside Tax Shelter
The tax treatment of any income or growth arising from the investment if held directly, i.e. outside of a tax shelter such as an ISA as outlined in the product literature.
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Minimum Contributions
Availability
The methods available by which investors may invest in the plan.
Investments held within ISAs (Individual Savings Account) are sheltered from Income Tax and Capital Gains Tax. ISAs are available in two forms: Cash ISAs and Equity (Stocks & Shares) ISAs, which are described below.
Cash ISA
In any tax year, subject to eligibility, an individual (over the age of 16 years) can invest up to £5,100 in a Cash ISA. Cash ISAs do not expose the capital to risk other than in exceptional circumstances.
Equity (Stocks & Shares) ISA
In any tax year, subject to eligibility, an individual can invest up to £10,200 in an Equity (Stocks & Shares) ISA, less any money invested in a Cash ISA in the same tax year. Cash can also be held pending future investment in an Equity ISA. Interest on cash held in the Equity (Stocks & Shares) component will be subject to a flat 20% tax charge.
Click here for more on ISAs
Direct refers to holding the investment outside of a tax-sheltered wrapper such as an ISA or SIPP. Thus, any returns generated by direct investments will be subject to tax as detailed in the plan’s individual terms and conditions.
Such investments can accept the transfer in of existing Cash ISAs from a different provider whilst retaining the tax sheltered status on those funds and without affecting current year ISA subscription allowance. Exit charges may apply from the existing provider.
Such investments can accept the transfer of existing Cash ISAs or Equity ISAs from a different provider whilst retaining the tax sheltered status on those funds and without affecting current year ISA subscription allowance. Exit charges may apply from the existing provider. It should be noted that a Cash ISA transferred to an Equity ISA can not subsequently be transferred back into a Cash ISA.
Such investments can, be held in a Self Invested Personal Pension (SIPP) subject to the rules of the pension provider / individual scheme.
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Capital at Risk Barrier Observation
There are nine types of protection commonly used in retail structured products.
- Not Applicable: Capital 'Protected' at Maturity
- End of Term Only: Capital at risk if reference asset (e.g. Index) is below barrier at the final index level only
- Full Term daily close: Capital at risk if reference asset (e.g. Index) closes below barrier on any day during the term
- Full term intra-day: Capital at risk if reference asset (e.g. Index) falls below barrier at any point during the term
- Part Term daily close: Capital at risk if reference asset (e.g. Index) closes below barrier during a defined period during the term
- Part Term intra-day: Capital at risk if reference asset (e.g. Index) falls below barrier at any point during a defined period during the term
- Combination (see description): A combination, or variation of any the above
- No Barrier Protection: Capital at risk
- No Barrier Protection, Reduced Downside: Capital at risk, but reduced by less than 1% for every 1% fall in the reference asset (e.g. Index) below the Starting Index Level
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Opinion
This is the subjective opinion or observations by StructuredProductReview.com and should not be construed as advice or a recommendation to invest. Products shown as 'Preferred' are those that, following our research and cross-referencing against other plans available at the date of review, we would usually expect to utilise in the course of our day-to-day role of advising our clients. This is not to say that plans not marked as 'Preferred' would be unsuitable or inappropriate for other investors and could produce better returns.
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Preferrred
Products shown as 'Preferred' are those plans that, following our research and cross-referencing against other plans available at the date of review, we would usually expect to utilise in the course of our day-to-day role of advising our clients. However, plans not marked as 'Preferred' may well be more appropriate or suitable for you . It must be appreciated that it is very possible that none of the investments featured on this site are suitable for you and so the 'Preferred' status or lack of it should not be construed as advice or a recommendation to invest.
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Counterparty Solvency
In addition to investment risk, the return of capital will be dependant upon the continued solvency of the underlying counterparty or deposit taker throughout the term of the investment. Before proceeding, investors must be aware that should the plan’s underlying counterparty or deposit taker file for bankruptcy during the term of the plan, or be unable to repay its liabilities, some or all of the capital invested may be lost. As with all investments, it is imperative that investors read the plan brochure and terms and conditions thoroughly and understand the risks involved, before proceeding.