NS&I 5 Year Growth Bond - A good deal?

Leblanc_2

The 5 Year NS&I Growth Bond provides 2.55% interest. There is a 90 day penalty on the interest of the sum cashed in early.

This seems quite a good deal to me because I can cash in 1,2,3 or 4 years later at 1.91% if I need the money, and of course 2.55% for the full term. After April 2016 this will be net interest.

I cannot see any pitfalls in this for a largish sum, and it seems quite a good deal in an obviously secure bank. Am I correct?

I am not interested in a Santander 123 account as too much hassle transferring current accounts and or direct debits as well as monitoring money transfers.

Dan83

At the moment you can get more interest from quite a few banks (TSB, Lloyds, Tesco, Nationwide to just name a few) and you can access your money any time with out penalty or fee, these interest rates arnt guaranteed for 5 years and it would take some management, but it's not difficult.

I know what I'd do with my money and it wouldn't be NS&I

Leblanc_2

Higher interest is possible with these banks you mention , but not for a largish tranche of money, unless I have missed something. They usually involve drip feeding an account with about £500 to £1000 per month up to a general maximum between £2,000 to £3000. This also involves setting up a number of accounts and keeping an eye on the transactions and the variable interest rates, rather than one largish tranche then essentially forgetting about it for a period because it is fixed interest.

Dan83

Would you not consider setting up the accounts then with left over cash, invest in the bond you want?

The main thing that puts me off long term saving is interest rates, they are really low at the moment, how long for is anyone's guess.

I've read about the possibility of interest rates going negative (which I don't will happen), in which case 2.55% is good if it happens for s long enough period.

I think more likely at some point interest rates will go up, possibly this year, who knows (again I've read all sorts). If interest rates go up 2.5% you will be loosing out big time, although you can take money out, the time penalties/fee's would be enough to put some people off.

Also, is the 2.55% paid annually and compounded for 5 years or do you get 1 payment of 2.55% at the end?

robber2

Sorry LeBlanc, I've got some bad news for you; this is from NS&Is website;

"No Issues of our Guaranteed Growth Bonds, Guaranteed Income Bonds, Fixed Interest Savings Certificates or Index-linked Savings Certificates are currently on general sale. "

Leblanc_2

That is annoying robber 2. I spoke to someone at NS&I only yesterday concerning the reinvestment of a maturing bond (which I can still do) as well as buying a new 5 year one. I was concerned that the interest rates would change before the maturity date ie 17 January, and that if I arranged the transfer of the maturing bond now I could be locked into a lower rate. I was assured that the rates would not change before that date because this member of staff would have been told. I was also told that I would not be limited by the amount I could put into a new 5 year bond at 2.55%. I decided to wait until the beginning of next week just in case, and this is the result!

Pdman

Still available for maturing 65+ bonds. See ns&i web page.

Leblanc_2

Yes, that's what I was talking about in a maturing bond.

Dan83

2.46% for 3 years available at the bank of cypres, little bit less interest but 2 years shorter so if the interest rates do go up, your not waiting asking to get it back

moneyfoolish

Leblanc wrote: »

The 5 Year NS&I Growth Bond provides 2.55% interest. There is a 90 day penalty on the interest of the sum cashed in early.

This seems quite a good deal to me because I can cash in 1,2,3 or 4 years later at 1.91% if I need the money, and of course 2.55% for the full term. After April 2016 this will be net interest.

I cannot see any pitfalls in this for a largish sum, and it seems quite a good deal in an obviously secure bank. Am I correct?

I am not interested in a Santander 123 account as too much hassle transferring current accounts and or direct debits as well as monitoring money transfers.

As the interested is calculated daily, surely this rate will be about 1.90% if you cash in after a year but will increase for each year you hold the bond?

Leblanc_2

moneyfoolish wrote: »

As the interested is calculated daily, surely this rate will be about 1.90% if you cash in after a year but will increase for each year you hold the bond?

It has been withdrawn, so a non sequitur unfortunately.