RBS has launched a “defensive” product linked to the FTSE 100 index, called the UK Step-down Defensive Kickout Plan 1. It carries potential annual gross return of 7 per cent.

With a maximum six-year investment term, it could mature early at the end of each year on any one of its five annual early maturity dates.

If the plan does not pay out the equivalent of 7 per cent (gross) for each year it is open, investors receive 100 per cent of their original investment back, as long as the FTSE 100 index does not fall by more than 50 per cent during the full six-year term. If the FTSE 100 were to fall by more than 50 per cent, an investor’s original investment would reduce by the same percentage.

On each maturity date, the plan matures early and pays out if the FTSE 100 index level is higher than a certain pre-determined level. On year one, the FTSE must be the same or higher for this to be the case.

A key feature of this product is its “step-down” nature on each annual maturity date. That means that the pre-determined level is reduced by three percentage points for each year of investment, making it more likely to pay out the following year.

The kick-out levels for years one, two, three, four, five and six are therefore 100 per cent, 97 per cent, 94 per cent, 91 per cent, 88 per cent and 85 per cent respectively.

The plan was developed after research indicating that of those either holding or planning to invest in equity investments 24 per cent believed the FTSE 100 would fall; 37 per cent believed the FTSE 100 growth outlook would either “stay the same” or “fall” over the next five years; and only 9 per cent believed the FTSE would grow by more than 25 per cent over the same period (5 per cent p.a. in simple terms).

The plan is sold as an advised-only sale via an independent financial advisor.