Fixed Rate Bond

PompeyPete

1. My wife, a full time domestic engineer, so non-tax payer, has got a two year fixed rate bond with Nationwide maturing at the end of this month, and wants to re-invest it. The sum is £200K.

2. Nationwide's currently only has two fixed rate bonds, a
6-monthly, and a one year. The one year bond only pays 2.5%.

3. So she needs to look elsewhere, and wants to use 3 different providers. I can find one year online bonds with three different providers averaging 3.55%.

4. Is what I'm proposing in para 3 above the best route to go down, or should I consider something else?

5. She uses the interest to supplement our income pot on maturity. Would it make sense to take out bonds with different maturity dates, ie 1 x 6-monthly, 1 x one year, and 1 x 18 monthly. Then by keeping that cycle going there is never too long waiting for one of them to mature should she need the money fairly quickly?

Cheers

PP

PompeyPete

One more question please.
Do the on-line application forms usually include Form R85 for non-tax payers?

buffman

I try and organise my finances so that I have a fixed rate bond maturing every month or so. It gives added flexibility. Assumimg that you have used up your ISA allowances and ensuring that your wife invests no more than £85,000 per provided, I would invest £85,000 with Cahoot (3.6% for one year), £85,000 with Coventry (3.65%) for 18 months and the balance in an instant access account (e.g. ING paying 3.24%). If in a few months time, a better rate becomes available, you can decide whether or not to transfer the instant access money to it.

Lokolo

Part 5 is a good idea if you have long enough periods. 6 month bonds are usually VERY poor rates and you may as well have instant access. I would only consider Part 5 if you plan on having a 1 Year, 2 Year and a 3 Year bond and rotate it like that, your periods are too small to see any noticable difference (from above, the 18 month is only 0.05% better).

If you are willing to risk it you can buy some investment bonds which pay monthly income - but there is risk involved.

As for the R85, I can't remember but the chances are you don't do it online and do it at a later date by yourself.

xylophone

http://www.moneysupermarket.com/savings/fixed-rate-bonds/

should she need the money fairly quickly?

Do you also keep an "emergency fund" (instant access) as well as the £200000 in fixed rate savings?

My recollection is that if you apply on-line there is usually a box to tick re gross interest- check each application form.

PompeyPete

All.
Thanks for the reassurance.
I thought I was sort of on the right track.
And yep, we use the matured interest to partly fund an "emergency float".

patriick

I would invest £80,000 or so in the M&S 3 year bond at 3.75%, you can get your money back at any time by paying a £100 penalty (0.12% loss of interest).

http://money.marksandspencer.com/save-invest/fixed-rate-savings/overview/#further-details

oldvicar

buffman wrote: »

I try and organise my finances so that I have a fixed rate bond maturing every month or so. It gives added flexibility. Assumimg that you have used up your ISA allowances and ensuring that your wife invests no more than £85,000 per provided, I would invest £85,000 with Cahoot (3.6% for one year), £85,000 with Coventry (3.65%) for 18 months and the balance in an instant access account (e.g. ING paying 3.24%). If in a few months time, a better rate becomes available, you can decide whether or not to transfer the instant access money to it.

patriick wrote: »

I would invest £80,000 or so in the M&S 3 year bond at 3.75%, you can get your money back at any time by paying a £100 penalty (0.12% loss of interest).

http://money.marksandspencer.com/save-invest/fixed-rate-savings/overview/#further-details

Saving £85,000 with any one institution is a particularly odd amount to deposit. If its the FSCS protection you are after, it would make more sense to have just under £85K - for example just £80K (or less for a longer term if interest would exceed the 85K), and then the interest is protected too.

Although I have no concerns re the safety/protection of ING, some point out that it is not covered by the FSCS, but by the equivalent Dutch scheme, where the limits are a smidge lower at the minute (100K euro).

oldvicar

PompeyPete wrote: »

One more question please.
Do the on-line application forms usually include Form R85 for non-tax payers?

I think it varies. Often you may have to sign/return something, e.g. to prove identity, so an R85 could be done at that time.

From recent experience (to amemd status of existing accounts):

Online declaration:
- Northern Rock (now Virgin)

Offline (paper):
- Nationwide
- RBS
- Investec

Not much of a problem either way, as long as the application is clear which is required.

Ifts

If you want slightly better rates and can lock the money away for longer, it may be better to go for 1, 2 and 3 year fixed rate bonds (as already pointed out not a lot of difference in rates between 6 month bond and easy access accounts).

If you rely on the income you can opt for a bond that pays monthly or annual interest rather than waiting for the bond to mature.

I have just gone for a 3 yr bond @ 4.01% with Secure Trust Bank

Interest payable will be paid out to a nominated Bank Account annually on the 31st December. Interest will also be paid upon Maturity of the Bond.
Its an online application, as a non taxpayer you get the option to tick the R85 form and have to print it off and post it to them.

You can obtain an R85 form at the HMRC website: www.hmrc.gov.uk/forms/r85.pdf

libra10

You can download and print a copy of R85 tax form here -

http://www.hmrc.gov.uk/forms/r85.pdf