Personal Finance: Under The Spotlight/Commercial Union's premier investment bond

The product: Commercial Union's Premier Investment Bond.

The deal: Invest at least pounds 2,500 in the bond and Commercial Union will "guarantee" to pay a return of 9 per cent in the first year. Investors putting in more than pounds 5,000 can also receive a small regular income from the investment, rising with age.

Plus points: The return beats most investment bonds available and charges, at first glance, appear to be pared to the bone. CU has dropped the usual initial charge (bid/offer spread). A policy charge of 0.08 per cent per month looks like good value.

Commercial Union has been very successful at marketing investment products such as this bond because advisers believe the company can support its products from a sound financial base.

For wealthy investors putting more than pounds 50,000 into the bond, CU will actually invest more than the fund is worth, or 102 per cent of the money put up.

Drawbacks and risks: The "guaranteed" return is eye-catching, even when it only applies for a year. However, CU is not guaranteeing anything with regard to the investor's capital. If the securities in which CU's life fund invests - mostly UK equities - fall in value then CU reserves the right to apply a market value adjuster, a straight deduction from the fund. The company says it has never applied this. However, pressure for it to do so is likely to increase if the present volatility in the stock market turns into a downward slide or a crash.

The charges are not quite as good as they first appear. Investors who are not 100-per-cent certain they will not need to cash in their investment should avoid this because there are hefty surrender penalties of up to 9 per cent for early encashment. And the 0.08 per cent per month fee translates into a charge of more than 1 per cent a year: this is where CU's profit comes from.

Verdict: Solid for those who already have solid finances.

Marks out of five: Three.

-Andrew Verity