NSI easy access income bonds

cganesh

I have seen lots of comparison web-sites looking at savings interest rates etc but know little about these bonds.According to their web site they are 100% secure.Is this true because they are offering a good interest rate 1.75%? I am thinking of putting a lot of money from a house sale into an account(or several if i have to due to the 85K per person guarantee, but it is temporary and may be for under a year as I will be looking for another house.This could mean a low interest rate but these 'income bonds' say they are guaranteed however much you put in and you can cash them in whenever you want.You may have guessed I'm not brilliant at money but is this right,sounds too good to be true or am I missing the catch?

CLAPTON

many would consider 1.75% as a poor rate but yes they are secure and you can withdraw at any time

cganesh

I am comparing that with rates for money in an account for under a year, which may be what I need.I have seen higher rates but when you look into details they include a 12m bonus rate.Do you know of any better that may fit my requirements?

innovate

There's nothing else where your savings are protected for more than £85K per person per financial institution.

There's not much in general that pays more than 1.75% AER - - - 2% seems the norm in instant access savings accounts.

You can squeeze out a little more if you use a cash ISA (2.5% AER net for instant access, max £5,640 before April 6, and another £5,760 after April 5), or several current accounts (Nationwide, Santander, Lloyds, BoS). All the current account offer 3% upwards but there are finite limits on the balance that will earn interest, and you have to meet pre-requisites. There are plenty of threads about these accounts on this Forum.

cganesh

Yes, I could put a few bits here and there but this a/c would be useful too because it would all be in one place which makes it easy to open and to close straight away.I did look for a better rate on a 30 day notice ac which would be ok if buying a house but couldn't find anything better.

alanq

cganesh wrote: »

I am comparing that with rates for money in an account for under a year, which may be what I need.I have seen higher rates but when you look into details they include a 12m bonus rate.Do you know of any better that may fit my requirements?

Why are you dismissing accounts paying bonuses?

The NS&I Income Bond rate is variable. As with other variable rates there is no limit to how low it can go. Accounts with bonuses have rates that are variable but USUALLY the bonus element is fixed so the total rate cannot fall below that. Often financial institutions bring out variable rate accounts that pay a (relatively) high rate, stop selling that type of account to new customers and then drop that rate over the course of a year meanwhile bringing out a similar accounts to attract new money. The effect is much the same a having a bonus without the guaranteed element.

You say that you may need the money within a year. If that is the case you will not be affected by a bonus ending. USUALLY one does not have to keep the account open for a year to get a bonus. Interest is calculated daily and added to the account at a certain date or on closure if sooner. RARELY one has to keep an account open by maintaining a minimum balance until a certain date to receive a bonus .

As always read the Ts&Cs of any account you are considering to avoid any surprises later.

cganesh

Thanks Alanq,but you have honestly confused me now. The accounts I am talking about have said 1.50% (this includes an annual .50% bonus) and I have assumed that you need to hold that amount for a year otherwise you get 1.00%. Have I understood this wrong then? Why do they say that ,If you get 1.50% however long you have it in there, why do they seperate those amounts? There are plenty of accounts which compete with nSI then, I don't understand.

alanq

cganesh wrote: »

The accounts I am talking about have said 1.50% (this includes an annual .50% bonus) and I have assumed that you need to hold that amount for a year otherwise you get 1.00%. Have I understood this wrong then?

Without knowing the accounts that you are looking at I cannot be sure but as I said USUALLY one gets the bonus even if one closes an account during the year. It does seem that you have misunderstood.

You may find some accounts with bonuses have an option to pay interest monthly including bonus interest.

amiehall

The main benefit of NS&I is that 100% of your money is protected. To get the same protection elsewhere, you need to split the money into chunks of £85k and put them with different banking groups. Proceeds from a house sale could mean a lot of accounts! Using NS&I means you can keep it all together and stay protected. This is how no bank can compare to NS&I.

In terms of interest rate, of course there are better rates out there. I'm sure you have misunderstood the idea of the bonus. Most accounts apply a bonus for a fixed time meaning that they can drop the rate after eg. 12 months, not to force you to keep the account open for the full period of the bonus.

cganesh

Now I feel stupid..Thanks guys for the enlightenment. I think they should say total rate which goes down after 12m rather than 'includes bonus of ...) like they show with mortgage rates. However, I get it now. I would only need 2/3 accounts,amiehall, as they would be joint accounts and therefore double the protection figure ( unless i've misunderstood that as well!!) but you are right, the NSI has that useful advantage as I'd rather only open one.

polymaff

I've used Income Bonds in the past. I regard the "100% safe" tag as a bit of malarkey - but it is probably safer than most. The most annoying aspect of Income Bonds is the uncertainty surrounding withdrawals. As it all has to be done via the (unreliable) post the access is not "easy" in my book. What is more, when you nominate the amount you want to withdraw they pay a different amount - sometimes more, sometimes less!

You don't believe me? Well it is true! I recently asked them to transfer £xxxk to a bank which had a good account providing you put in at least £xxxk. They paid about £100 less than requested and I had to do the legwork to get that £100 from another bank into the receiving bank half-way through the account opening process. Crazy.