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With interest rates remaining at extremely low levels finding a attractive interest rate for your savings, can certainly be challenging,  we therefore thought we would give you details of The Income Deposit Plan 8.

The plan has a fixed term of three years and is designed to repay back your original investment at the end of the term plus a fixed annual interest payment of 4.10% gross per year.

This article is designed, along with the accompanying literature (right), to help you make a decision whether this plan is suitable for you.

Who is the plan provider?

The Income Deposit Plan 8 is provided by Legal & General (Portfolio Management Services) Limited, a company authorised and regulated by the Financial Services Authority (FSA).

As Plan Manager, they are responsible for the management of the Plan.

Ulster Bank Limited are the authorised deposit taker. Legal & General will pass your money to Ulster Bank on the start date of the Plan.

Ulster Bank Limited is a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS).

As at 20th December 2010 Ulster Bank Limited has been rated as ‘A’, with a negative outlook, by Standard & Poor’s, ‘A2’, with a negative outlook, by Moody’s and ‘A+’, with a stable outlook, by Fitch.

These ratings are given to institutions considered to have a strong capacity to meet their financial commitments.

How can I invest in the plan?

The minimum you can invest is £3,600; there is no maximum amount you can invest.

You can invest in the plan in the following ways:

  • Cash ISA for the current tax year
  • Cash ISA Transfers
  • Direct investments, for individuals
  • Direct investment for companies, pensions (SIPP and SSAS) and trusts

Key Features

The Income Deposit Plan 8 is designed to offer an annual interest payment of 4.10% gross / AER (Annual Equivalent Return) and the return of your original investment at the end of the three year term

The income payments will be made into the account details you provide on the following dates:

  • 1 March 2012
  • 1 March 2013
  • 3 March 2014

You will earn pre-investment interest at a fixed rate equivalent to 0.87% gross/AER from the date your payment is treated as cleared until 24th February 2011. This interest will be included in your total investment amount

The plan will come to the end of its fixed term on 3rd March 2014

Key Risks

In the unlikely event that Ulster Bank Limited was to default or go bankrupt, investors could lose some or all of their investment. In that case, the FSCS (Financial Services Compensation Scheme) may provide protection up to £85,000 (across all accounts with Ulster Bank Limited) to qualifying investors.

If you have to take out some or all of your money before the end of the fixed term, you may receive back less than you originally invested and you will lose any unpaid interest payments.

Inflation may reduce the value of the investment in the future.

Investors may only withdraw money from the Plan prior to the end of the three year term with the consent of Ulster Bank Limited who have no obligation to provide consent. If investors do withdraw money before the relevant maturity date, they will receive only the discounted value of their Investment at that time, which may be less than the amount they invested.

How is the plan taxed?

If the plan is held via a Cash ISA the interest will not be subject to tax.

If you hold the plan directly interest paid will be paid net of UK income tax at the basic rate (currently 20%) as required by law. This satisfies the income tax liability for a basic rate taxpayer. Higher rate and additional rate taxpayers will have further tax to pay.

If you are in receipt of age allowance, the interest could impact on your entitlement.

If you are a non-tax payer or your taxable income is below the starting rate for savings income, currently £2,440, you may be able to reclaim some or all of the tax deducted from HM Revenue & Customs using the tax voucher that will be provided.

Any interest payments from the investment will not be subject to capital gains tax.

If you invest via a SIPP or a SSAS the interest will be paid gross and is not normally subject to tax.

 Is the plan right for me?

This Plan may be right for you if you are looking for:

  • Your money to be invested for a fixed term of three years
  • A fixed interest rate paid annually
  • A deposit based plan
  • You have other money set aside for short-term needs/emergencies and any debts you may have

The Plan may not be suitable if you are looking for:

  • Access to your money during the fixed term
  • A way to set aside money for emergencies or to cover any debts
  • A return linked to the stock market, for example, the FTSE 100 Index

How secure is my investment?

During the fixed term your money is held on deposit by Ulster Bank Limited and is protected in the same way as it is with any other bank or building society account that you have.

Ulster Bank Limited is legally bound to pay your money back to Legal & General at the end of the fixed term, together with the returns due under your Plan.

If Ulster Bank Limited cannot pay Legal & General what they owe, you may not receive all of your money back, although protection may be provided by the FSCS.

Before and after the fixed term Legal & General hold your money in a client bank account.

Once they get your money back from Ulster Bank Limited at the end of the fixed term, it is held it in the same way. Because this money is held in a client account and separate from their own money if Legal & General were to become insolvent your money would be safe.

However, if the bank or building society that provides this client account cannot pay Legal & General that money you may not receive all of your money back, although again you may be protected by the FSCS.

The Financial Services Compensation Scheme (FSCS)

The FSCS is designed to pay customers compensation if they lose money because a firm is unable to pay what they owe for any reason. Most depositors, including individuals and small businesses, are covered by the FSCS.

Your ability to claim from the FSCS and the amount you may be entitled to will depend on the specific circumstances of your claim.

Ulster Bank Limited is a member of the FSCS and so, if Ulster Bank Limited is unable to pay back your money for any reason, for example becoming insolvent, you may be able to claim compensation for any loss you have suffered.

The FSCS covers the first £85,000 each customer holds with each bank or building society.

This means that any money you have in other accounts with Ulster Bank Limited as well as any money you hold in this Plan would count towards the £85,000 limit. If you have £85,000 or less in total with Ulster Bank Limited, including the money you have put in this Plan, you should get back all of your money. If you have more than £85,000 in total held with Ulster Bank Limited, you may lose some or all of the money you hold in this Plan.

You may also be able to claim compensation for any loss you suffer in the event that the bank or building society which provides our client bank account is unable to pay back your money while it is held there before or after the fixed term. Any claim would again be limited to the first £85,000 you hold with that bank or building society and so any money you have in other accounts you hold with that bank or building society would count towards this limit.

The rules of the FSCS may change and the FSCS may take a different approach on the application of these rules to a particular bank or building society depending on the circumstances of the failure of that bank or building society to pay back what it owes.

You can find out more about the FSCS (including amounts and eligibility to claim) by visiting its website http://www.fscs.org.uk/ or calling 0800 678 1100.

Important Information

Offer available 29th December 2010 to 11th February 2011 (unless oversubscribed sooner)
Start date 1st March 2011
End of fixed term 3st March 2014

Please refer to literature below for further information on the risk factors, charges, and full details of your cancellation rights.

Commission

For arranging this contract we will receive a commission of 0.75% of the amount invested. Therefore if you invested £10,000 we would receive a payment of £75.

Financial Advice

This article, together with the relevant documents (below) does not represent personalised advice and is not confirmation that the Income Deposit Plan 8 matches your financial requirements. 

If you should have any doubts about whether this product meets your own needs you should seek independent financial advice from us so that your individual circumstances can be considered.

Application forms

Completed application forms should be sent to:

Investment Sense, Lace Market House, 54 – 56 High Pavement, Lace Market, Nottingham, NG1 1HW

Please call us on 0845 074 7778 should you have any queries when completing your application form.

Forms, Information & Brochures

ISA brochure

Non ISA brochure

Terms & Conditions

ISA & ISA transfer application form

Non ISA (direct) application form

Pension & Trust application form

Company application form