Monthly interest on bonds

Hilldweller

Hello - this is my first post here; it seems full of very knowledgeable people so I am confident I'll get my answer!

Simple question: when working out the actual monthly income on a three-year bond do I just divide the overall interest less 20% tax (as calculated on moneysupermarket, using the advertised bond monthly interest rate) by 36? It seems too obvious...

Thanks.

le_loup

Yeeeessss, but. Generally it will be based upon the number of days in the month. So you get less for February and more for January. But the difference is tiny.

sorcerer

You will get a rough estimate that way, just remember not all months are created equally, and interest in Febuary will be less then March for example.

sorcerer

Damn u beat me too it :-)

Hilldweller

Thanks for such speedy responses. I'll reduce my spending in February.

le_loup

You don't need to, there are less days to spend.

opinions4u

le_loup wrote: »

You don't need to, there are less days to spend.

If the reduced February interest is paid on the 1st March I suppose it's the March spending that needs to reduce.

Unless budgeted via credit card, at which point the billing cycle of the credit card takes over.

But that might simply be complicating the issue.

VT82

Hilldweller wrote: »

Hello - this is my first post here; it seems full of very knowledgeable people so I am confident I'll get my answer!

Simple question: when working out the actual monthly income on a three-year bond do I just divide the overall interest less 20% tax (as calculated on moneysupermarket, using the advertised bond monthly interest rate) by 36? It seems too obvious...

Thanks.

Depends what you mean by 'the overall interest'. If you mean the balance multiplied by the interest rate, you'll need to divide it by 12 rather than 36 to get the approximate interest - the rate quoted will be per year rather than over the whole 3 years.

Andystriker

Tell us which financial isntitution you are saving with and what the rate is and the experts on here will tell you how much interest to expect

Hilldweller

I am taking early retirement at the end of December and will have a lump sum which I want to invest for monthly income. I am thinking of putting around £60-80k (haven't decided yet on the exact amount since I can take a larger or smaller lump sum/pension - as I am only 54 I am thinking of smaller lump sum) into the Post Office's 3 year bond, if it is still available then - if not, something similar at the best possible rate I can find.

If someone could tell me approximately what this would equate to per month (I will be a standard rate tax-payer and am single) I would be overjoyed.

Thanks all.

VT82

It doesn't look like that has a monthly interest option I'm afraid. Interest can either be paid annually or compounded in the account.

It doesn't mean you should ignore it altogether though if you like the rate - just keep enough aside in a top paying instant access account that you then withdraw from monthly - a monthly interest 'DIY'.