FINANCE NEWS: CAF savings account to offer protection from market falls

Mathew Little

Charities Aid Foundation is to launch a radical savings account designed to protect charities from losses on the stock market.

The CAF Charity Guaranteed Reserve, a joint venture with Bristol & West bank, combines two separate accounts: one providing a fixed rate of interest, the other linked to the performance of stock market indices in the UK, Europe, the US and Japan.

"This has upside potential but no downside," claimed John Rogerson, head of investment services at CAF. "Even if the market goes down, charities will be protected from the fall and they will get a reasonable slice of the pie if the market goes up."

Half of depositors' capital is placed in an income account receiving a fixed rate of 5 per cent monthly interest. The remainder is put in a growth fund which pays out after six years according to the performance of the four stock market indices - UK FTSE-100, the US S&P 500, the Swiss SMI index and the Japanese Nikei 225.

Investors in the account receive 70 per cent rather than 100 per cent of any growth in markets, while part of any positive return is used to ensure a guaranteed reserve should the markets subsequently fall.

According to Rogerson, charities have not had the option of this kind of bank account before. "We believe it is the first offering of its kind to the charity market, although it is common in the retail market," he said.

CAF has already mailed existing customers about the product and has received nearly 500 enquiries.

"We have seen charities very disappointed by their returns on the equity market," said Rogerson. "We wanted a product to address their needs. People want a bit of an upside but also protection from the downsides. Nobody expected the falls in the markets over the past three years."

The minimum deposit in the new account is £5,000 and the maximum is £10 million.

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