NS&I or KRBS for childrens savings ?

sc52

I was just about to put my children's (17, 16 and 13) savings into the tax free NS&I RPI plus 0.5% savings, but then realised, that as they don't pay tax anyway, the KRBS savings of RPI plus 2% is a better option for the elder two (account is for over 16s only).

Is this assumption correct or have I missed something?

I'm assuming that they will remain non-tax payers until term.

Thanks

SC

Baldur

sc52 wrote: »

I was just about to put my children's (17, 16 and 13) savings into the tax free NS&I RPI plus 0.5% savings, but then realised, that as they don't pay tax anyway, the KRBS savings of RPI plus 2% is a better option for the elder two (account is for over 16s only).

Is this assumption correct or have I missed something?

I'm assuming that they will remain non-tax payers until term.

You have missed something.

The KRBS 2% is the gross interest over the full 5 year term, not 2% per annum (works out at 0.39% per annum).

kidmugsy

NS&I: RPI plus 0.5% p.a.
You need to check whether the the KRBS offer RPI plus 2% p.a. or RPI plus 2%.
A lot of the reporting on this sort of thing is very slack ("slack" is a euphemism for 'stupid'.)

You might also want to check on the penalty for early withdrawal, and reflect on whether you'd prefer that to be light or heavy.

kidmugsy

Aha, Baldur made my point as I typed.

Sceptic001

Also note that with KRBS you are locked in for 5 years. With NS&I you get index-linking after one year and can withdraw without penalty. So in the event that inflation rates start to fall and/or other rates rise you can switch to a better product.

dtsazza

The NS&I certificates are RPI + 2.534% if you want to compare like-with-like when it comes to the full-term rates. So they pay more than the KRBS, the access is better, and there's absolutely no risk of default (though the odds of your losing your money in either case are practically zero).

sc52

Thank you for all your replies, NS&I has it.

As suggested above, I thought KRBS was 2% pa. My fault for not reading it more thoroughly, just saw the "RPI plus 2%" and made the wrong assumption!

Thank goodness I checked before leaping!

SC

Sceptic001

dtsazza wrote: »

The NS&I certificates are RPI + 2.534% if you want to compare like-with-like when it comes to the full-term rates. So they pay more than the KRBS, the access is better, and there's absolutely no risk of default (though the odds of your losing your money in either case are practically zero).

And NS&I compound annually, so you will in effect get your 2.534% index-linked. And, in the unlikely event that inflation is negative in any given year (as it was for parts of 2008 and 2009 when mortgage interest rates plummeted) your capital at the end of the year with NS&I is never less than the start plus the annual fixed rate.