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NFU Mutual income bond with guaranteed 5%

10th May 2011 Print

NFU Mutual has launched a new six-year income bond paying a guaranteed income of 5% each year net of basic-rate tax.

That means for a £50,000 investment there will be a guaranteed income of £2,500 each year, payable in quarterly instalment of £625. This amounts to £15,000 over the full six year term.

What's more, NFU Mutual is offering customers enhancements to capital if they invest before 5th June or if they invest over £150,000. The bond is available from 9th May until 24th June - but will close earlier if it is fully subscribed.

The bond aims to return the original investment at the end of the term. However, while the income is guaranteed, the amount invested isn't and investors may get back less than they put in.

Chris Linpow, personal finance specialist at NFU Mutual, said: "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.

"Income bonds of this nature are by no means suitable for every investor but this could be a very worthwhile investment for some people if they are prepared to take risk with their capital. That's why this bond is only available on the advice of an NFU Mutual financial consultant after full consideration of people's individual circumstances.

"Structured investments have come into the spotlight over recent years following concerns about risks over the failure of third parties who have been providing a guarantee for the investment.

"NFU Mutual's income bond is entirely underwritten by NFU Mutual. We don't use third parties to provide guarantees so any contract is purely between the customer and us."

The bond aims to return the original investment at the end of the term but, because it's linked to the FTSE 100, the sum invested in the new income bond may suffer if, at any point during the six year term, the stock market takes a tumble to half of its starting position or lower.

An average measurement of FTSE 100 closing values will be taken between 6th July and 5th August 2011 to calculate an initial level. Over the following six years, the FTSE 100 can fall by up to 49% from this level and the investment capital in the NFU Mutual income bond will remain intact.

If, however, the FTSE 100 drops by half or more than half of the initial level at any point during the six year investment period, the amount of capital returned at the end of the term may be less than was originally invested.

Income tax

Any personal tax due on the investment will be assessed when the bond matures. The tax treatment depends on individual circumstances and may change in the future.

Special enhancements

NFU Mutual is running a special incentive to help encourage investment. Anyone investing before 5th June will benefit from an extra 0.25% bonus to their capital investment. For anyone with £150,000 or more to invest, there is a 0.5% enhancement that will rise to 1% if the amount invested is £250,000 or more.

The bond may be suitable for customers who:

Already have savings but are looking for potentially better returns;

Can invest £20,000 or more for at least six years;

Are comfortable with risk to their money;

Accept that other types of investment with more risk may provide the potential for better returns;

Like the idea of guaranteeing a known level of income for six years.

To find out whether the NFU Mutual Income Bond is right for them, investors should call into one of over 300 NFU Mutual branches across the UK or visit nfumutual.co.uk to book an appointment with a financial consultant.

An enquiry may result in a call from an NFU Mutual financial consultant, who advises on NFU Mutual products and services and in special circumstances those of other providers.