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    • funguy
    • By funguy 4th Dec 17, 2:22 PM
    • 520Posts
    • 807Thanks
    funguy
    NS&I New Growth Bonds
    • #1
    • 4th Dec 17, 2:22 PM
    NS&I New Growth Bonds 4th Dec 17 at 2:22 PM
    Hi All,
    I just renewed my growth bond with the NS&I last month at a rate of 0.95% fixed for a year (Nov17-Nov 18)

    I see the rate has just increased to 1.50% fixed for a year. If i cash in early then i lose 90 days interest - I think im correct in saying that even if i cash in early and pay the penalty, I will be better off at the end of the year. Has anyone else done this - do they just show a negative interest amount till you make it up or take it out your capital?

    Its also 2.2% for 3years but would people agree its likely to not be worth it incase of rate rises in the future?

    Thank you
Page 1
    • talexuser
    • By talexuser 4th Dec 17, 2:30 PM
    • 2,305 Posts
    • 1,792 Thanks
    talexuser
    • #2
    • 4th Dec 17, 2:30 PM
    • #2
    • 4th Dec 17, 2:30 PM
    I think 2.2% for 3 years is a risk on beating inflation (now 3% CPI and 4% RPI). The last 2 years would have to be well below 2% target to break even, the way Brexit is going we may have a significant slowdown needing lots of money printing. It's probably a good bet if you are averse to any risk though.
    • RG2015
    • By RG2015 4th Dec 17, 4:30 PM
    • 639 Posts
    • 328 Thanks
    RG2015
    • #3
    • 4th Dec 17, 4:30 PM
    • #3
    • 4th Dec 17, 4:30 PM
    Hi All,
    I just renewed my growth bond with the NS&I last month at a rate of 0.95% fixed for a year (Nov17-Nov 18)

    I see the rate has just increased to 1.50% fixed for a year. If i cash in early then i lose 90 days interest - I think im correct in saying that even if i cash in early and pay the penalty, I will be better off at the end of the year. Has anyone else done this - do they just show a negative interest amount till you make it up or take it out your capital?

    Its also 2.2% for 3years but would people agree its likely to not be worth it incase of rate rises in the future?

    Thank you
    Originally posted by funguy
    I have not done this but the I agree that you will be better off by cashing in the 0.95% bond and taking out a 1.50% bond. On £10,000 for a full year, the interest is £95 compared to £150 with a penalty of £23.42. The Ts&Cs state that if you cash in before 90 days that you will get out less than you invested. So yes, they will take it out of your capital.

    The Ts&Cs state that as Bonds are a fixed rate investment with a set term, there is no right to cancel after investment. However, I was able to do this with Virgin Money when they increased their rates one day after I took out a fixed term ISA .

    Does any one know why the 14 day cancellation rights do not apply to NS&I?

    2.20% for three years probably won't match inflation but I am not sure that 1.50% for one year is less of a risk. Will one or three year rates be anywhere near inflation in a year's time?
    • EachPenny
    • By EachPenny 4th Dec 17, 4:46 PM
    • 3,351 Posts
    • 6,239 Thanks
    EachPenny
    • #4
    • 4th Dec 17, 4:46 PM
    • #4
    • 4th Dec 17, 4:46 PM
    Unless you are investing more than the £75k I'm not sure there is a good reason to invest with NS&I at a fixed rate of 1.5% for a year. You can already get 1.45% easy access, with a possibility of the rates nudging up a bit more. Putting even a fraction of the total into a regular saver @2.25% would mean it was possible to beat 1.5% overall without too much effort. The 1.45% rate is not fixed, but if interest rates fall significantly over the next 12 months then we will all have far more to worry about than a fraction of a percent on our savings rates.
    "In the future, everyone will be rich for 15 minutes"
    • jamiex
    • By jamiex 4th Dec 17, 10:17 PM
    • 187 Posts
    • 100 Thanks
    jamiex
    • #5
    • 4th Dec 17, 10:17 PM
    • #5
    • 4th Dec 17, 10:17 PM
    If you're considering the 1.5% 1 year bond, it seems to me you'd be better off choosing the 2.2% 3 year option instead for the following reason:

    Withdrawing after 12 months would cost you 90 days' interest penalty (approximately 1/4 of the interest = 0.55%) leaving you with an effective rate of 1.65%.

    Here's what I've calculated as the AER based on the number of months with the 3 year bond: (apologies, can't figure out how to format this in a table)

    Months AER
    1 -4.40%
    2 -1.10%
    3 0.00%
    4 0.55%
    5 0.88%
    6 1.10%
    7 1.26%
    8 1.38%
    9 1.47%
    10 1.54%
    11 1.60%
    12 1.65%
    13 1.69%
    14 1.73%
    15 1.76%
    16 1.79%
    17 1.81%
    18 1.83%
    19 1.85%
    20 1.87%
    21 1.89%
    22 1.90%
    23 1.91%
    24 1.93%
    25 1.94%
    26 1.95%
    27 1.96%
    28 1.96%
    29 1.97%
    30 1.98%
    31 1.99%
    32 1.99%
    33 2.00%
    34 2.01%
    35 2.01%
    36 2.20%
    Last edited by jamiex; 05-12-2017 at 12:05 AM.
    • RG2015
    • By RG2015 6th Dec 17, 5:52 PM
    • 639 Posts
    • 328 Thanks
    RG2015
    • #6
    • 6th Dec 17, 5:52 PM
    • #6
    • 6th Dec 17, 5:52 PM
    The 90 day penalty does appear rather generous. Is it possible that NS&I may amend this in the near future?

    I assume that they could not doe this retrospectively.
    • EachPenny
    • By EachPenny 6th Dec 17, 6:54 PM
    • 3,351 Posts
    • 6,239 Thanks
    EachPenny
    • #7
    • 6th Dec 17, 6:54 PM
    • #7
    • 6th Dec 17, 6:54 PM
    The 90 day penalty does appear rather generous. Is it possible that NS&I may amend this in the near future?

    I assume that they could not doe this retrospectively.
    Originally posted by RG2015
    If it was a much higher interest rate then I'd agree with you, but 2.2% is not that spectacular when you consider what rates elsewhere might look like in 12 months time.

    NS&I have built a reputation on security and reliability and I doubt they would want the potentially negative publicity if rates go up further and many 'pensioners'* find themselves 'trapped' on a poor interest rate with a punitive loss if they close the account early.

    *I use the word 'pensioners' not as a factual remark, but the term the media are likely to use in spinning the story.
    "In the future, everyone will be rich for 15 minutes"
    • RG2015
    • By RG2015 6th Dec 17, 7:23 PM
    • 639 Posts
    • 328 Thanks
    RG2015
    • #8
    • 6th Dec 17, 7:23 PM
    • #8
    • 6th Dec 17, 7:23 PM
    but 2.2% is not that spectacular when you consider what rates elsewhere might look like in 12 months time.
    Originally posted by EachPenny
    Love your optimism!
    • EachPenny
    • By EachPenny 6th Dec 17, 8:22 PM
    • 3,351 Posts
    • 6,239 Thanks
    EachPenny
    • #9
    • 6th Dec 17, 8:22 PM
    • #9
    • 6th Dec 17, 8:22 PM
    Love your optimism!
    Originally posted by RG2015
    I'm not entirely optimistic though!

    What I mean is 12 months ago we were scrabbling around for easy access accounts which paid 1%, some of NS&I's rates had then recently fallen from 1% to 0.75%. Now we are discussing best buys of 1.45% with only a 0.25% BoE rate increase - and only a handful of providers have so far increased their rates as a result of the BoE increase.

    Many of those familiar with current account interest and regular savers would view 2% as the minimum worth bothering with, some RS accounts have already been increased to 2.5%.

    Another BoE rate rise, another round of banks putting up their rates a bit, and 2.2% could start to look a bit mean, especially for an account which ties your money up for three years.

    A relatively small exit penalty gives people an 'out'. But another factor is people who accept NS&I's generally lower interest rates are perhaps more conservative in their outlook and habits than others, so don't need a significant penalty to induce them to stay put.
    "In the future, everyone will be rich for 15 minutes"
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