Capital idea

By THIS IS MONEY
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I HAVE £7,000 to invest at medium/low risk. Myself and my partner are only 50. Capital growth seems to be the ideal solution. We already have £8,000 invested in Legal & General Peps. Any suggestions? G, Helston.

Colin Jackson at Baronworth Investments says: Assuming you are a basic rate tax payer, there are a number of options offering growth with medium/low risk.

For instance, guaranteed growth bonds offer almost no risk. You invest a lump sum into a bond with a fixed term and growth rate. You get you money back at the end plus the growth, paid net of basic rate tax. Alternatively with profits bonds from insurance companies are a low risk home for a lump sum.

They are Open-ended but there are penalties for cashing them in during the first five years.

The life company generally declares a bonus annually which is added to your investment and once added, it cannot be taken away. When you eventually cash in, you may also be entitled to a terminal bonus.

Another option is growth bonds linked to a stock market index. Some are riskier than others, but I particularly like the one from AXA Isle of Man Limited, which is a five-year investment linked to the performance of the FTSE 100.

Return of capital is guaranteed together with at least 20% growth and up to a maximum of 65%. There are a whole host of products linked to indices, the majority of which put your capital at risk.

The headline rates can be particularly attractive but the literature can be quite complicated. Read it carefully as the devil is in the detail.

These are only three options. There are many more and whether they are suitable depends upon your view as to risk, your tax position and how long you wish to tie your money up.

Seek advice from an Independent Financial Adviser who is experienced in the lump sum investment market.

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