WAY RE-LAUNCHES INCOME PLAN
WAY Income Plan.
Details:
Type: Unit trust income plan.
Aim: Income and growth by investing in a cash fund and/or choice of four WAY funds of funds.
Minimum investment: Lump sum £25,000.
Investment split: 25% Elite Income Cash Trust or WAY Global Cautious Portfolio, 75% WAY Global Total Return Portfolio, WAY Global Blue Managed Portfolio or WAY Global Red Active Portfolio.
Charges: Elite Income Cash Trust 0.5% a year. WAY Global Cautious Portfolio and WAY Global Total Return Portfolio initial 5%, annual 1.45%. WAY Global Blue Managed Portfolio and WAY Global Red Active Portfolio initial 5%, annual 2%.
Contact: Telephone: 01202 890895
Review:
WAY Fund Managers has revamped the WAY Income Plan, which it launched in 1998. This unit trust plan aims to provide a steady tax-efficient income that will rise over the long term and will be unaffected by interest rates.
To do this, it converts irregular capital profits from a managed-equity portfolio into long-term regular income.
Investors' capital is split in two - income and growth. The income pool is set at five times the annual income that is required and investors may take income of 3 - 7 per cent a year. This is payable on a monthly or quarterly basis and is paid into the investor's bank.
The income pool comprised a cash fund but now investors can pick a cautious fund of funds managed for WAY by multi-manager specialist IMS if they do not want to hold cash in their plan. The annual charge has been halved to 0.5 per cent.
The growth pool relies on equities to deliver higher growth and investors have a choice of four risk-graded funds of funds to achieve this. Spikes in performance can be used to top up the income portfolio.
Every three months a review is carried out and a portion of any growth achieved in the growth pool will be used to top up the the income pool. Topping up the income pool will increase the level of income investors take because although the percentage of withdrawals stays the same, the pot from which it is taken will be bigger.
A software package enabling advisers and clients to simulate historical scenarios and compare returns from the plan with competitor income products has been added.
Setting the income pool at five times the annual income that is required gives the plan some leeway in generating the growth required to trigger a top-up.
WAY says that on rare occasions, such as a lengthy and severe bear market, the income reservoir could run out. If this happens, income will be taken from the growth element and the income reservoir will be topped up again when markets recover.
The investment strategy means that volatility can work in investors' best interests because it prompts rebalances which trigger increases in income. However, investors should be aware that taking a modest income at the start will improve the frequency of income increases, while taking a higher income initially means that income rises will be less frequent.
PLEASE REMEMBER: Any "income" drawings will be withdrawals of capital. Depending on the growth of the funds in the growth pool, these drawings may result in an erosion of your overall capital.
Link: WAY Income Plan
This commentary first appeared in Money Marketing magazine on 9th August 2007. Reproduced with kind permission.
Please Note: This commentary has been prepared for Financial Intermediary Clients and Professional Associates of WAY Investment Services Ltd and is not intended for and must not be distributed to Private Investors. This information is supplied to you in confidence and you may not pass it on to any other party without prior written consent. Past performance is not necessarily a guide to future returns and changes in rates of exchange between currencies may cause the value of investments to rise or fall. No representation or warranty is given (express or implied) as to the accuracy, completeness or correctness of the information nor the opinions, interpretations and conclusions contained in this commentary. The commentary does not constitute investment advice or a recommendation to purchase or sell any security. Neither the author nor WAY Investment Services Ltd accept any liability whatsoever for any loss or damage arising in any way from any use of or reliance placed on the commentary. WAY Investment Services Ltd is an Appointed Representative of WAY Fund Managers Ltd which is authorised and regulated by the Financial Services Authority.
Press Release Date: 17th August 2007