Investment & Insurance Blog

Currently browsing Latest Posts

IDAD launch Issue 2 of their UK Income Deposit Plan – July 2023

IDAD have launched a new tranche of their UK Income Deposit Plan – Issue 2 – July 2023 plan.  A summary of the plan is provided below but please refer to the Brochure for full details of the investment.  The plan is only available on an ‘Advised’ basis.

The Deposit Taker for this plan is Royal Bank of Canada and a brief resume is provided below.

About Royal Bank of Canada: Royal Bank of Canada is a diversified financial services company. The Company provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services. Royal Bank offers its services to personal, business, public sector and institutional clients with operations worldwide.

Royal Bank of Canada are the Deposit Taker for the UK Income Deposit Plan; therefore investors are exposed to the risk of them defaulting on their obligation to repay the capital and any returns due under the terms of the Deposit Plan.

Considerations when selecting the deposit taker / issuer:

Fitch, Moody’s and Standard & Poor’s are the main three independent credit ratings agencies that research and grade the ability of financial and other institutions to make the payments due from the Deposit / Plan issued and / or guaranteed by them. Each rating agency describes and names its ratings in a different way. For example, Standard & Poor’s highest possible rating is AAA, followed by AA and A. These three ratings along with their BBB rating are generally regarded as investment grade (i.e. of higher quality). All of these ratings, except the AAA rating, can also be modified by a plus or a minus to give a deposit taker’s / Issuers relative status within the grade; for example, A+, A, A- for the A rating.

Royal Bank of Canada have ratings from each of these agencies as follows:

*S&P’s AA- / Moody’s Aa1 / (*Source Bloomberg and Plan Termsheet)

IDAD UK Income Deposit Plan – Issue 2 – July 2023
This is a 5 year 2 week Deposit Plan linked to the performance of the FTSE 100 Index. The Deposit Plan is constructed to offer a potential return of 7.30% p.a. If on any annual observation date (including the Final Observation date), the Underlying index is between the upper and lower barrier levels income will be paid. For clarity, if on any annual observation date, the index is outside the range, no income will be received, and the plan continues until the next observation date.

The opportunity for full capital protection and Income is the key aim of this investment.

The investment is linked to the FTSE 100 Index (see page 6 of the Brochure for full details) and investors will benefit from growth or declining market conditions.

The initial investment into the Deposit Plan, minus any initial adviser fee, will be returned in full at maturity.

Below is an illustration of how the upper and lower barriers observed annually would be set, assuming the FTSE 100 Index on the Strike Date being 7,500 points.

Click here for more details of IDAD UK Income Deposit Plan – Issue 2 – July 2023
Don’t Forget the Risks

As with all forms of investment there are risks involved. Some plans do not guarantee to repay the money invested. The potential returns of the plans and repaying the money invested are linked to the level of the stock market and also depend on the financial stability of the Issuer and Counterparty Bank.

Past performance is not a guide to future performance and may not be repeated.  Investment involves risk. The performance data does not take account of the commissions and costs incurred on the issue and redemption of shares. The value of investments and the income from them may go down as well as up and investors may not get back any of the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. Exchange rate changes may cause the value of overseas investments to rise or fall.

The promotion of the plans does not constitute ‘advice’ to invest. Advice is always specific to an individual investor’s circumstances and needs, following the process of ‘know your customer’, with the aim of ensuring that any product is suitable for an investor.

As always, the recommendation and common sense approach is to consider product solutions as a portfolio, never over-exposing oneself to a point of financial pain and suffering liquidity or counterparty over exposure.

At the Best Price FS price point the iDAD Plans are certainly worthy of consideration for inclusion within investment portfolios.

Warmest Regards.

Best Price FS Team

Advice: Simply click here to get in touch if you wish to receive regulated advice in relation to the ‘suitability’ of the plans to meet your investment needs.