Legal & General is pitching its first three-year product linked to the FTSE100 index to UK independent financial advisers.
James Harrington, head of commercial implementation at Legal & General, told SRP it is a "trial product" launched in response to demand from IFAs.
"We are constantly reviewing our product range ... The fact is that digital products, rather like auto-calls, don't require a full economic cycle to take advantage, as the plan only requires a one-point rise in the index to pay a coupon," he said. "For this reason, advisers can use them in addition to both collective investments and other structured solutions for tax-planning purposes. Another thought does seem to be that at just three years in length, if the FTSE isn't up at maturity but still remains above the barrier, and subsequently pays out 100%, then any potential real loss against inflation is reduced."
The three-year capital-protected digital/protected-tracker structure will pay 131% capital return at maturity if the FTSE100 is at or above the strike reading. The product includes a 50% European barrier on the underlying, and the capital protection is provided by Santander UK's Abbey National Treasury Services.
SRP data shows that use of the three-year term in the UK has been limited in 2012, with only 47 products (4.8%) out of the 967 structures marketed so far this year. That compares to the more popular five-year term with 308 products (31.8%), and the leading six-year term with 336 structures (34.7%).
In terms of payoff types, digital is by far the most popular among the three-year products, featuring in 21 structures (44.6%) ‑ well above the uncapped call (eight products) and the capped call (four products). Overall, digital is the third-most-used payoff so far this year (112 products/11.5% of the issuance) after the knockout (126/13%) and the uncapped call (150/15.5%).