How do Accelerated Growth Investment Plans Work?

Accelerated growth investment plans offer investors leveraged exposure to the upside of an underlying asset e.g. normally an Index such as the FTSE 100.


To help explain how these investments work the following is an example:

A 5 year term accelerated growth investment plan linked to the FTSE 100 offers a potential return at maturity of 200% times any rise in the FTSE 100 with no upper limit.

Growth of the Index is measured by comparing the Initial Index level of the FTSE 100 when the plan started with the Final Index Level of the FTSE 100. The Final Index level can be measured in a number of different ways but for the purposes of this example the average closing levels of the FTSE 100 on each business day over the last 6 months of the plan term are taken.

So in the event that the Final Index level is higher than the Initial Index level this plan would pay out on maturity a return of 200% of the growth between the Initial and Final Index levels of the FTSE 100 and the original capital invested

So based on an original investment of £10,000, if the FTSE 100 had risen by 20% over the investment term, the maturity payout would be £4,000 plus the initial £10,000 i.e.Compass £14,000 in total.

Any gains would normally be subject to CGT. taxation rules are subject to change and will depend on the individual circumstances of the investor.

In the event that the Final Index level is lower than the Initial Index level for this plan example you would lose 1% of capital for every 1% the index has fallen below the Initial Index level. As such this type of investment plan is only suited to investors willing to accept the risk that they might lose some or all of their capital.

There is also a risk that the counterparty to the plan (normally a UK bank) may not be able to repay your monies and any stated returns.

Features of Accelerated Growth Investment Plans

  • Provide investors with an opportunity to make an accelerated or magnified return if plan requirements are met.
  • The return proceeds will normally be subject to CGT and not income tax (tax treatment rules are subject to change).
  • Suitable for investors who are comfortable with putting their capital at risk.
  • You need to be comfortable with the counterparty and the possibility that if the counterparty defaults you may not get your money back.
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