Morgan Stanley reveals Gilt-Backed Growth plan

Morgan Stanley has unveiled the Gilt-Backed Growth Plan 8, designed for investors with a moderately positive outlook on UK equities but with no firm view on timing.

On each anniversary of the plan start date, the level of the FTSE 100 index is measured and if the index is equal to or above the start level, the kick out feature is triggered and investors “lock in” a fixed return of 7% a year. If investors choose to exit the plan, they will receive the fixed return plus their initial investment.

The maximum return of 42% is achieved if the kick out feature is not triggered until the final year (six years times 7%). The plan also includes a 50% soft protection barrier, observed throughout the plan.

UK government bonds are purchased to secure the capital protection for the plan and investor exposure to Morgan Stanley’s credit risk is minimised by the use of collateral arrangements.

The minimum investment for the plan is £3,000 and it is open for investment from 1 April 2011 until 13 May 2011, with an early investment discount equivalent to 0.5% a year.

The deadline for ISA transfers is 6 May 2011 and the plan can also be invested in through a SIPP or SSAS.