Early withdrawal of childrens bonds

virgin_moneysaver

16 months ago I placed with Natwest a childrens bond for each of my sons at a value of £1000 fixed at 3.75% for 5 years(it seemed a reasonable rate at the time) but now the rates are rising would I be advised to close early, pay any penalty and place the funds elsewhere - and if yes where's the best place to put the boys money

Thanx

Fatboy_NSS

Well the bonds as they are have just over 3.5 years left to run. £1000 at 3.75% would earn you £37.50 a year, which would be £131.25 in the next 3.5 years. An Abbey 4 year childrens bond pays 5.50%, which would be £55 a year or £192.50 over the next 3.5 years. Over the reamining period of your bond, Abbey would pay £61.25 more. So if Natwest would charge you less than £61.25 to close the bond now you'd be better off switching.

I should note that I am an Abbey employee so I'm mentioning a product that I'm familiar with, not necessarily the best available.

Fatboy_NSS

No I was just doing simple calculations as it's late Interest is paid back into the bond annually, so future interest would be accumalated based on the principal and accumulated interest. I assume interest on the Natwest bond mentioned would be paid in the same way, so you would actually make more than the £61.25 I mentioned by switching to the Abbey product.

Again, I don't claim to have knowledge of the full marketplace so other companies may well have better products, but just giving a rough example.