7% Bonds

DocProc

passion8

£100,000 would get you 5.54% net of tax or £5,540.00.

The gross interest paid would be 6.92% gross (or £6,920.00) but tax would have been deducted at the 20% rate (or £1,380).

You would get a Certificate of Tax Deducted for inclusion in your Tax Return to show this.

isofa

passion8 wrote: »

I'm not sure what a bond actually is, apart from an 'I.O.U.' but if 100K was put into bonds at Saga, what would the return be please?

Excuse the simplicity, I'm a moneyphobe

These bonds are just a fixed rate account with limited access, i.e. the money is locked away for 1 year, 2 years, 3 years or more, and the interest rate usually guaranteed when the bond was taken out.

At the end of the term you get the money you deposited plus the interested accrued each year, unless you opted to have the interest paid out to another account.

They are risk free, you don't loose anything and the interest return is guaranteed.

If you do withdraw any funds before the end of the term (some allow this, some don't) you loose massive amounts of interest, but obviously you never loose the capital you deposited in the first place.

passion8

The cut off date (September 26th?) is too soon for us to consider these bonds, but the figures mentioned, (thanks DocProc ), give me a better understanding of what the 100K might bring in the future. I'll share this knowledge with my husband, who's also a moneyphobe

Thanks to all that replied, it's much appreciated.

ETA a thank you to isofa for the extra information. It's something to bear in mind, so I'll make a note of it.

passion8

Scrap that date I mentioned please, I've just seen rarrarrar's post on the thread .....

http://forums.moneysavingexpert.com/showthread.html?p=6350372#post6350372

...... but thought I'd mention it in case it helps anyone else.

rarrarrar

yes October 26th for the 6.92% bond.
SAGA's website is ambiguous and the page only seems to have been partially updated with the new 1yr rate information
I have taken out a 1 year bond and the literature with the application form ( arrived today) confirms the October date.
SAGA also said that once I had asked for an application form then I was guaranteed the rate as long as money received by 26th October

Agent_C

I recently opened a 1 year internet saver bond at BM when the interest rate was 6.7%.

I got as far as sending a cheque for £1 to open the account, but have not yet paid any more money in. Now they have this new bond paying 6.9%. Do you think I woudl be able to easily change to the new bond, or would it be best to just open a new bond afresh?

nilrem_2

Agent_C wrote: »

I recently opened a 1 year internet saver bond at BM when the interest rate was 6.7%.

I got as far as sending a cheque for £1 to open the account, but have not yet paid any more money in. Now they have this new bond paying 6.9%. Do you think I woudl be able to easily change to the new bond, or would it be best to just open a new bond afresh?

You may find that they automatically give you the latest rate anyway, I had a bond maturing with them and sent instructions to invest in another of their bonds, some days after I sent my instructions they brought out a higher rate bond, in fairness to them they gave me the new higher rate.

TBH If you are unsure the best thing is to give them a call.

Agent_C

Thanks, I called them and they said I wouldn't be able to change the bond and would need to open a new one. However, as I had already gone through the process of setting up an account, verification etc, I was able to do this quickly on the internet and should be able to start using the account soon.

Liz_the_Whizz

My DH has an application form for the Saga bond (I'm not eligible;) ).

I still don't understand the 7.14% AER. Surely this is notional as monthly interest on the bond is paid into a separate nominated bank account, not compounded into the money deposited in the bond - or have I misunderstood.

So the interest you actually receive on your money over the year is 6.92%.

Can someone tell me if I am right or wrong?

Nick_C

The interest you receive is 6.92%, but because its paid monthly you are able to reinvest it. If you could reinvest it at 6.92%, you would end up with 7.14%.

If you put your interest into a regular saver account you can achieve or exceed this rate.