NS&I. Bonds or stay with ISA

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dream_on
dream_on Posts: 13 Forumite
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Hi,
My 3year fixed Virgin ISA ends on 24th December. My options with Virgin are one year fix at 1.41% or 3 years at 1.65%. I have £38,750 to invest and won’t need the money for 3 years. I have maximum amounts in high interest bank accounts. Should I stick with ISA or go with NS & I Guaranteed growth bond at 2.2% for 3 year fix? Advice please on these options or any others. Thank you
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  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    If you will need the money in 3 years the NS&I Guaranteed Growth Bond is in my opinion probably the best option. Certainly better that putting it in the 3 year fixed Virgin Cash ISA. You won't have to pay any tax on the 2.2% NS&I bond unless your total interest outside of ISAs is over £1,000, so I don't see any reason to keep the money in a Cash ISA.
  • RG2015
    RG2015 Posts: 5,907 Forumite
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    Will you be liable for tax and will this be at 20%, 40% or more? The main benefit of an ISA is that it is tax free unlike the NS&I bond.

    However, if you pay tax at 20% then the NS&I bond at 2.20% will still yield 1.76% after 20% income tax.
  • RG2015
    RG2015 Posts: 5,907 Forumite
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    edited 12 December 2017 at 5:30PM
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    Audaxer wrote: »
    If you will need the money in 3 years the NS&I Guaranteed Growth Bond is in my opinion probably the best option. Certainly better that putting it in the 3 year fixed Virgin Cash ISA. You won't have to pay any tax on the 2.2% NS&I bond unless your total interest outside of ISAs is over £1,000, so I don't see any reason to keep the money in a Cash ISA.
    I guess you mean will not need the money in 3 years.

    Even if the OP does need to access the money, the 90 day penalty is not particuarly onerous. However, I have heard that the penalty is not offset against the interest for the purposes of tax liability.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    RG2015 wrote: »
    I guess you mean will not need the money in 3 years.

    Even if the OP does need to access the money, the 90 day penalty is not particuarly onerous. However, I have heard that the penalty is not offset against the interest for the purposes of tax liability.
    No, I did mean to say what I said. The OP said they would need the money in 3 years, so I just trying to say that if he/she did need the money in 3 years time the NS&I bond was the best option. If he/she intended to invest for longer, there would be different options.

    I agree that even if the OP did require to withdraw the money early, the 90 day interest penalty is not too onerous.
  • dream_on
    dream_on Posts: 13 Forumite
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    Thank you all. I pay tax at 20% due to my NHS and state pension combined. I know I will not need the money in the next 3 years but after that I’m not sure whether I will or not. I’m 64 years old and currently in good health but one never knows the future. I won’t have £1000 of interest
  • RG2015
    RG2015 Posts: 5,907 Forumite
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    dream_on wrote: »
    Hi,
    My 3year fixed Virgin ISA ends on 24th December. My options with Virgin are one year fix at 1.41% or 3 years at 1.65%. I have £38,750 to invest and won’t need the money for 3 years. I have maximum amounts in high interest bank accounts. Should I stick with ISA or go with NS & I Guaranteed growth bond at 2.2% for 3 year fix? Advice please on these options or any others. Thank you
    Audaxer wrote: »
    No, I did mean to say what I said. The OP said they would need the money in 3 years, so I just trying to say that if he/she did need the money in 3 years time the NS&I bond was the best option. If he/she intended to invest for longer, there would be different options.

    I agree that even if the OP did require to withdraw the money early, the 90 day interest penalty is not too onerous.

    Not sure what you're reading.
  • RG2015
    RG2015 Posts: 5,907 Forumite
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    dream_on wrote: »
    Thank you all. I pay tax at 20% due to my NHS and state pension combined. I know I will not need the money in the next 3 years but after that I’m not sure whether I will or not. I’m 64 years old and currently in good health but one never knows the future. I won’t have £1000 of interest
    £38,750 @ 2.20% = £852.50 in year 1. If you have maxed out high interest bank accounts, all it takes is another £148 and you've exceeded £1,000 in the year.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    RG2015 wrote: »
    Not sure what you're reading.
    RG2015, just to clarify what I was reading - the OP said "and won’t need the money for 3 years" which I took to mean he will not need it within the next 3 years, but in 3 years time he will need the money.
  • RG2015
    RG2015 Posts: 5,907 Forumite
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    Audaxer wrote: »
    RG2015, just to clarify what I was reading - the OP said "and won’t need the money for 3 years" which I took to mean he will not need it within the next 3 years, but in 3 years time he will need the money.
    Sincere apologies, Audaxer.

    I understand, and you are correct. I am now wondering what I was reading. :)
  • dream_on
    dream_on Posts: 13 Forumite
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    Thank you, didn’t realise the interest would be £852.50 per year on £38,750. Would I just pay tax on any amount over £1000 and not the whole amount?
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