Fixed Interest Investments
Secured Debentures, Capital notes and more
There are various forms of fixed interest investments in addition to bank term investments and bond funds:Secured Debentures
Traded Endowment Policies (TEPs)
Contributory Mortgages (we have elected not to deal in this high risk market)
Rates of return reflect the risk involved. We can access a wide range of investments and interest rates.
It is important when investing to also have exposure to growth assets such as equities, share markets, particularly internationally or your investments will not keep pace with inflation.
Capital Note Offer
Capital notes are higher risk than "secured debenture funds". There is always a risk/return trade off.
Click here to request further information and an investment statement and application form.
Similar to contributory mortgages, but the main difference is that the debentures are spread across around 150-200 different mortgages minimising the risk of capital loss if one of the mortgages folds. In the event of a financial problem with the main company the 'secured' part means that investors will be ahead of the capital note holders and shareholders in the company.
These are before tax rates. You can nominate the rate you want tax deducted from your interest payments: 19.5%, 33% or 39% RWT. For non residents there is the 2% "approved issuer levy", or 15% non resident withholding tax.
Traded Endowment Policies ("TEP")
The secondary market for insurance policies has been in operation in New Zealand since 1994 with over $30 million has been invested in TEPs.
A TEP is an insurance based investment bond contract taken out with some of the largest financial institutions in New Zealand. The product offers a blend of capital protection and growth.
|Investment Time Frame||Five to ten year terms|
|Maturity Exit Fee||Nil|
|Taxation Policy||Tax paid investment|
TEPs are a fixed interest type investment, with returns compounded annually and paid out in one lump sum at maturity.
|Company||Maturity Date||Projected Maturity value||Purchase Price||Projected Tax Paid Yield||Pre-Tax Equivalent @ 19.5%||Pre-Tax Equivalent @ 33%||Pre-Tax Equivalent @ 39%|
Benefits of the investment
- Capital guarantee component
- Tax paid investment
- Strong security rating
- No entry costs or additional fees
- NZ Guardian Trust is the Custodian and paying agent
- Utilises the funds management expertise of the life insurance companies
What are my risks?
Capital Risk - In most cases the amount invested in a TEP is covered by the guaranteed amount payable by the insurance company at maturity. The Capital Risk is therefore very low as Policy Exchange only deals with insurance companies within BBB- Standard & Poors rating or better.
Yield Risk - The yield is dependent on the future earnings (bonus) performance of the insurance company. Unlike other forms of managed funds the earnings volatility from year to year is minimal. This is because insurance companies take a long term view of investment performance and smooth bonus payouts to investors. This is a fundamental concept of traditional life insurance based investments. Bonus rates have changed little over the last five years.