Why invest in NS&I Guaranteed Income Bonds over Guaranteed Growth Bonds?

wookie6

Hi,

Looking at the NS&I 1 Year guaranteed fixed bonds, why would anyone opt for Guaranteed Income Bonds over Guaranteed Growth Bonds when Guaranteed Income Bonds pay 3.90% gross/3.97% AER where as Guaranteed Growth Bonds pay 4.00% gross/AER?

All aspects of the two bonds appear to be the same. Am I missing something?

Stubod

I presume the income bonds pay out interest monthly and growth bonds only pay out interest at the end of the term? So it depends whether you want a monthly income or not?

ranciduk

Yep , a monthly ‘income’ !

trooperdore

Also for tax planning reasons. If someone was expecting to receive a higher income in the tax year when the bond matures then they might want some of the interest to pay out in the earlier tax year to avoid going over a tax band.

Enprimeur49

I have just discovered that  because I failed to pay attention to the implications of the Over 65s' Guaranteed Growth Bonds renewal, I am now locked in to 0.4% and cannot cash in the bond until  April 2024. Normally one would expect to be able to cash in, albeit with a loss of interest and perhaps additional penalty.  (The interest is trivial in this case). I know I have been negligent (and ignorant of this web site's advice), but the penalty in this case seems excessive and I do not understand why NSandI have imposed such a penalty on elderly savers who did not log into their NSandI account in time to save a substantial loss of nearly £500. Do they despise us? Does anyone have an explanation?

km1500

I think it is because the terms and conditions when you took it out stated it would roll over on maturity into a new bond.

Elderly savers are quite capable of logging into their accounts in time and I am sure many would resent your implication that they are unable to remember to do this.

TheGreenFrog

There is a 30 day period after the roll over during which you can cancel the bond without penalty. But if you are on 0.4% I assume the roll over was quite a while ago.

Band7

NS&I write to you around a month before your Bonds mature explaining the options available to you. The maturity letter is in your online account.

If you believe they failed to write to you, and/or did not issue a maturity letter, you have a valid reason to complain to them. Being elderly is not a reason for a complaint, and they don't despise you. Although you do say that you failed to pay attention, so you might have to just put it down to experience, and pay attention next time an account matures.

DietIrnBru

Enprimeur49 said:

I have just discovered that  because I failed to pay attention to the implications of the Over 65s' Guaranteed Growth Bonds renewal, I am now locked in to 0.4% and cannot cash in the bond until  April 2024. Normally one would expect to be able to cash in, albeit with a loss of interest and perhaps additional penalty.  (The interest is trivial in this case). I know I have been negligent (and ignorant of this web site's advice), but the penalty in this case seems excessive and I do not understand why NSandI have imposed such a penalty on elderly savers who did not log into their NSandI account in time to save a substantial loss of nearly £500. Do they despise us? Does anyone have an explanation?

I doubt they despise you given you had an option of 2.8% or 4% - which was well above savings rates available in 2015. 

Explanation - terms and conditions - whether NS&I sent a reminder to you, I cannot say. But I’m guessing If you can open an account online - a reminder can be put in an electronic calendar on a phone. 

TheoG58

Hello, newbie here. 
I took out one of these bonds last year when it peaked at 6.2%. What confuses me is that the income varies from one month to the next. Only by a few pounds but it seems odd. I tried looking on the NS & I website for an explanation but no dice. 
Anyone got a clue whats happening?  
Thanks.

Middle_of_the_Road

TheoG58 said:

Hello, newbie here. 
I took out one of these bonds last year when it peaked at 6.2%. What confuses me is that the income varies from one month to the next. Only by a few pounds but it seems odd. I tried looking on the NS & I website for an explanation but no dice. 
Anyone got a clue whats happening?  
Thanks.

Interest is calculated daily, and credited monthly. As there are more days in some months the amount of interest will vary accordingly.