Norwich Union offers monthly fixed income plan

Article date: 9 July 2003

From 21 July 2003, Norwich Union will offer the "Monthly FixedIncome Plan", a new tranche based, lump sum investment planoffering an attractive level of fixed monthly income.

The key features of the Plan are:

  • An attractive fixed monthly income rate of 0.47% (or 5.75%annually through a new investment in an Isa), which comparesfavourably against high street bank and building society savingsrates (albeit with greater risk)
  • Ability to tax-shelter part, or all, of the investment in anIsa (see "Tax Sheltering Options" below)
  • No maximum investment limit (minimum investment of£3,000)
  • A fixed, five year investment term, which has a commencementdate (strike date) of 19 September 2003, and an offer period thatruns from 21 July through to 15 September
  • The return of capital at the end of the five year term is notguaranteed and is subject to certain conditions being met (see"Managing The Risk To Capital" below)
  • .

Monthly Fixed Income Plan should appeal to investors who:

  • Are looking for an attractive rate of income, against thecurrent backdrop of low interest rates
  • Are willing to take some risk with their investment but areconcerned about managing the level of risk to capital
  • Have other investments, and are looking to re-invest
  • Are keen to tax-shelter some, or all, of their investment inan Isa or Pep.

Commenting, Neil Davies, head of investment product developmentat Norwich Union said: "Monthly Fixed Income Plan endeavours toprovide investors with an attractive rate of income in theprevailing economic conditions.

"We believe the time is right for a big named brand such asNorwich Union to offer this type of plan, which meets the obviousand increasing demand for an attractive level of fixed income."

Competitive Income

Gross monthly income is fixed at 0.47% per month.

For new Isa investments only (not transfers or directinvestments), there is an Annual Option – where income of5.75% is paid annually. For new Isa investments, and Isa/Peptransfers in, there is a roll up option - the Single Option - whichwill pay a single payment equivalent to 31.28% of the originalamount invested at the end of the full five year term.

Outside of an Isa, income is paid net of 20% tax. Higher ratetax payers will have an additional tax liability that they shoulddeclare on their tax return. Non tax payers, and lower rate taxpayers, may be able to reclaim all or some of the tax paid on theirinvestment.

Tax-Sheltering Options

Investors can choose to shelter some, or all, of theirinvestment in a mini or maxi stocks and shares Isa, subject to theGovernment’s prescribed limits.

Existing Isas and Pep investments can be transferred into thePlan, although these transfers must be for the full value in anytax year - no partial transfers are allowed. Investors must havecompleted transfer applications by no later than 15 August2003.

Over and above the Government’s Isa/Pep limits, there isno maximum investment limit into the Monthly Fixed Income Plan.

Managing The Risk To Capital

Capital will be returned in full unless both:

  • The FTSE 100 Index falls below 70% of its starting level atsome point during the five year term, and
  • The FTSE 100 Index is below its starting level at the end ofthe five year term.

Return of capital is based on 100% of the amount originallyinvested and will be returned at the end of the five year periodprovided that both of the above conditions have not beenbreached.

In other words, if the FTSE 100 Index is at 4,000 on 19September 2003 (the commencement date), it would need to fall to2,800 or less during the five year period, and also fail to recoverits starting position by the end of year five, for a breach tooccur.

Where a breach does occur, investors will lose 1% of theirinvestment for every 1% that the FTSE 100 Index is below itsstarting level at the end of the five year term.

Example Scenarios:

  1. Partial Capital Repaid:
    FTSE 100 level at strike date - 4000
    FTSE 100 level lowest point during term - 2000 (70% barrierbreached)
    FTSE 100 level at maturity - 3000 75% of original capitalrepaid
  2. Capital Fully Repaid:
    FTSE 100 level at 19 September 2003 - 4000
    FTSE 100 level lowest point during term - 2000 (70% barrierbreached)
    FTSE 100 level at maturity - 5000
    FTSE 100 fell below 70% but finishes above starting level
  3. Capital Fully Repaid:
    FTSE 100 level at 19 September 2003 - 4000
    FTSE 100 level lowest point during term - 3000 (70% barrier notbreached)
    FTSE 100 level at maturity - 3500
    FTSE 100 finishes below starting level but lowest point 75%

(The underlying assets are provided by an A+ rated company. AnA+ rating from Standard and Poor’s means the borrower islikely to repay their debt at the end of the five years, but thisis not guaranteed. If they do not repay the debt, Norwich Unionwill not guarantee either to pay the income or to return theinvestor's capital.)


There is an implicit initial charge of 6% which the productterms take full account of. There are no further charges.


Press office contacts:

Ian Beggs - 08703 66 68 71/07790 487533
James Evans - 08703 66 68 78/07790 487105
Louise Goffee - 08703 66 68 70/07810 057362
Lorna Wiltshire - 08703 66 68 78/07788 471849

Notes to editors

  • The minimum age for investors is 18.
  • The underlying assets are provided by a financial institutionwhich has an A+ credit rating from Standard & Poor’s.Norwich Union is not guaranteeing this plan.
  • The Monthly Fixed Income Plan is not suitable for investorswho may require access to their investment before the end of thefive year term. However, investors can gain access to their moneyat any time within the first five years; there will be no earlyexit penalty - investors will receive the market value of theirinvestment. This may be considerably less than the amountinvested. If the investor dies before the end of the term, theirbeneficiaries will receive the value of the underlying assets,which may be considerably less than the original investment.
  • Norwich Union is the UK’s largest insurer. It is aleading provider of life, pensions and investment products and oneof the leading IFA providers. IFAs provide around 70% of thecompany’s long- term savings business.
  • Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco Personal Financeand The Royal Bank of Scotland Group.
  • Norwich Union’s news releases and a selection of imagesare available from Aviva plc's internet press centre

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