Monthly interest on bonds

Hilldweller

That's odd - it was there yesterday and did offer monthly interest. However, I expect there will be other monthly interest bonds out there so my original 'in principal' question still stands!

Thanks for everyone's help.

opinions4u

Capital x net rate divided by 12 should give you a decent guide. Or gross rate x 0.8 divided by 12 will give you the same. Don't use the AER to caluclate this.
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Take a look at the C&G Step Bond ... averaging 4.25% for 3 years.

http://www.cheltglos.co.uk/savings/Step-bond/issue4.html

The even have a handy calculator to work it out for you.

http://savingscalculator.cheltglos.co.uk/calculators/savings-calculator.asp

For each £10k a basic rate taxpayer would get the following for a 30 day month:

Yr 1: £24.24
Yr 2: £27.45
Yr 3: £30.57

That said, I'd probably spend some time with an IFA before tying the money up. Your tax situation could be quite complex at present and the opportunities to make use of other financial planning options and tax breaks shouldn't be ruled out.

Hilldweller

Thanks for that - all very useful. I think the main tax issue is that I am at present a higher-rate taxpayer and will be paying 40% on my pension for the first three months of next year, which is a bit of a pain. I also have about £195k in various other bonds/ISAs, attracting interest annually. Plus, I will be self-employed after retiring (but only aiming to earn a bit of extra pin-money, not big bucks, mainly to avoid boredom). I have no second home or anything like that.

I have had a quick chat with an IFA through work, but he is dead keen for me to take the highest possible lump sum (presumably so he can invest it for me), whereas I am completely risk averse and also not especially money-orientated; I have no interest in playing the stock market (I have £10k in a S&S ISA and that's it). I'll have a pension of £23-24k and anything on top of that is a bonus as I have no mortgage or any other debts. I just want something very low risk for a predictable monthly income.

Ifts

Hilldweller wrote: »

I want to invest for monthly income. I am thinking of putting around £60-80k I am thinking of smaller lump sum) into the Post Office's 3 year bond.

VT82 wrote: »

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.

Hilldweller wrote: »

That's odd - it was there yesterday and did offer monthly interest.

You are right it did and it still does, (if its the one I'm thinking of, its still available). I think VT82 might be mistaken about the Post Office 3 year bond not offering monthly interest?

The 3 year fixed rate bond from the Post Office does offer a monthly interest option:

3 Year Term:
Annual interest: 4.21% gross3/AER2
Monthly interest: 4.13% gross3/4.21%AER2

http://www2.postoffice.co.uk/finance/savings-investments/online-bond & http://www2.postoffice.co.uk/finance/savings-investments/online-bond/interest-and-tax

opinions4u

Ideally you don't want to earn any new monthly interest until 6th April 2012 or later. Why is the monthly income so important? Saving in an annual paying account now can give you a rather handy lump of cash just before Christmas.

Are you sure you saw an IFA (independent) as opposed to an FA? I'd be looking in to reinvesting some of your lump sum in to pension etc to draw again with a tax free element at some point in the future - while you can still get 40% tax relief on it.

Hilldweller

Thanks,both - I find this whole topic confusing, boring but also, obviously, hugely important to my future lifestyle: a deadly combination. Monthly income appeals to me as I like to know I have a buffer zone and also I suppose it's due to having had a monthly salary for over 30 years... old habits, etc. I don't understand the stuff about putting the lump sum into a pension: how does that work, then? Presumably it would be a private pension (I am in the universities superannuation scheme)? Are they any good? Think I'll have to post on the pension forum now!

Good point about not wanting additional monthly income till April. That had vaguely crossed my mind also. I will act on that, so thanks again.