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Buying an NS&I Guaranteed Income Bond

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  • I presume she is going to be adding £2,880 to a pension each year to get the £720 tax relief and if she has limited income will also apply for Marriage Allowance.
  • philip42h
    philip42h Posts: 20 Forumite
    Eighth Anniversary 10 Posts Name Dropper Combo Breaker
    I presume she is going to be adding £2,880 to a pension each year to get the £720 tax relief and if she has limited income will also apply for Marriage Allowance.
    Yes to the first, probably, as it's 'free money' after all, and no to the second as it's not applicable - she's a kept woman ... ;)
    Philip
  • poppystar
    poppystar Posts: 1,634 Forumite
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    BooJewels said:
    I would reiterate what @auser99 has said - the NS&I Income Bonds are not competitive at the moment.  I took one a few months ago when they were more so - but that gap has since widened.  I only took one really as the money was already in NS&I, mistakenly thinking that would be easier, which it wasn't in the end. 

    My circumstances are similar and I use money put away in fixes to pay monthly interest out to me, as an income.  I too have gone with organisations that weren't known to me a few months ago and carefully checked the FSCS web site etc. to ensure they were covered.  I've been perfectly happy with the choices I've made.  Invariably, as soon as you make a decision, another organisation will up their rates, but that's pretty inevitable - and waiting it out costs money.

    They fluctuate a bit in what is offering the best rate and they periodically pull accounts for a short period.  But generally, you could get closer to 6% for monthly paid interest.  If you were to put 60k each into 2 fixes (for FSCS protection), at around that interest, you'd get around £590 / month interest.  You get a little less for monthly interest paid away than what might appear to be the headline AER rate - so do check that they offer monthly interest and can pay it away and what the rate is - it's usually around 0.07 or 0.08% lower - so a headline 6% account would pay 5.92% monthly - ish.


    Really useful - for some reason I had overlooked the fact that it is possible to have interest paid away in fixes, so have avoided them. I must have been looking only at those t where you can’t🙄. So that’s a new task for me for next week’s digital Scrooge activities! 
  • philip42h
    philip42h Posts: 20 Forumite
    Eighth Anniversary 10 Posts Name Dropper Combo Breaker
    edited 5 August 2023 at 4:33PM
    wmb194 said:
    philip42h said:
    auser99 said:
    philip42h said:
    auser99 said:
    Just to check, have you used up your combined £40k ISA allowance this year?

    And that you're comfortable having a rate with NSI way lower than a huge amount of other providers offer? Just to keep it all together in one "safe" place?

    I only ask as I'm in the process pretty much of moving stuff out of NSI as they're so wildly uncompetitive.
    So, yes to the first ... though my wife's income is low enough that she'll be struggling to pay tax anyway.

    To explain ... when I retired my wife decided that she didn't fancy working anymore. :) She has a small pension pot that she has been takiome drawdown and growth in that space hasn't been great. So, the plan is to give that a breather and let it recover, and use the windfall to provide an income over the next three or four years until her state pension kicks in.

    Ultimately, she wants to do something useful with the cash to help our children - i.e. she intends to give it away. The current NS&I one year fixed guaranteed income bond pays 5%. Beyond that there is the potential of one, two or three year bonds at the same or better rates. And that seems to work to bridge the gap to state pension age.

    So that's why we are looking at the NS&I income bonds. If there are better options that fit the bill I'd be very happy to learn (since, 'cos we messed-up, the money hasn't been stashed anywhere yet! ;) )
    All fair enough and personal preference always needs to win out.
    But there's a multitude of providers offering around 6% interest now.
    For example Kent Reliance offer 6.02% for a 2 year bond with yearly interest (or around 5.85% ish for monthly interest)
    Have a scroll through the fixed bond table on the site we're on under the banking section.

    Always check, but anything Money saving Expert contains in their recommendations table will have the 85k FSCS cover, so being a smaller lesser known name bank shouldn't be a worry.
    Thanks again ...

    I'd skipped over Martin's "Top Fixed Term Savings" list on the assumption that one couldn't access funds until the end of the term. Perhaps Martin could add a "Top Fixed Term Savings for Monthly Income"? - but I digress ...

    Looking through the list of 1 year fixes today, Smart Save and Cynergy Bank are clear that interest is paid at maturity only. For Atom Bank you can have interest paid monthly but, as far as I can tell from reading the material provided, you can't access said interest before the end of the term. The same appears to apply to the Kent Reliance 2 year bond.

    Of the established names, Tesco Bank at 5.85% AER looks promising and is clear that you can have monthly interest paid to a separate account (so monthly income) and then there is, of course, NS&I at 5.12% AER.

    I will investigate and discuss with SWMBO ... ;)
    I have Atom and Kent Reliance fixed rate, no access to the principal savings bonds that pay interest away every month to my nominated current account.

    From Atom's FAQs: "You may choose to have interest added to your account (‘paid in’) or paid into your nominated account, which is another bank or building society account in your name (‘paid out’)."

    https://www.atombank.co.uk/help/faqs/

    Ok, that is true - it's not that I doubted you it's just taken me an age to find the relevant entry in the FAQs and one needs to know the terms Atom use - namely 'paid in' and 'paid out'. No bonus points to Atom for clarity!

    Atom limits you to a total investment of £100k. You can only fund you Atom account via the faster payments service of your own bank and you are limited to doing so within "an initial seven-day deposit window" - which might be problematic if your own bank finds that prospect a bit scary. And then there is no 'cooling off period' so you can't get funds deposited in error back again until maturity.

    Options on maturity seem fine, and the interest rate is attractive ...
    Philip
  • wmb194
    wmb194 Posts: 4,930 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    philip42h said:
    wmb194 said:
    philip42h said:
    auser99 said:
    philip42h said:
    auser99 said:
    Just to check, have you used up your combined £40k ISA allowance this year?

    And that you're comfortable having a rate with NSI way lower than a huge amount of other providers offer? Just to keep it all together in one "safe" place?

    I only ask as I'm in the process pretty much of moving stuff out of NSI as they're so wildly uncompetitive.
    So, yes to the first ... though my wife's income is low enough that she'll be struggling to pay tax anyway.

    To explain ... when I retired my wife decided that she didn't fancy working anymore. :) She has a small pension pot that she has been takiome drawdown and growth in that space hasn't been great. So, the plan is to give that a breather and let it recover, and use the windfall to provide an income over the next three or four years until her state pension kicks in.

    Ultimately, she wants to do something useful with the cash to help our children - i.e. she intends to give it away. The current NS&I one year fixed guaranteed income bond pays 5%. Beyond that there is the potential of one, two or three year bonds at the same or better rates. And that seems to work to bridge the gap to state pension age.

    So that's why we are looking at the NS&I income bonds. If there are better options that fit the bill I'd be very happy to learn (since, 'cos we messed-up, the money hasn't been stashed anywhere yet! ;) )
    All fair enough and personal preference always needs to win out.
    But there's a multitude of providers offering around 6% interest now.
    For example Kent Reliance offer 6.02% for a 2 year bond with yearly interest (or around 5.85% ish for monthly interest)
    Have a scroll through the fixed bond table on the site we're on under the banking section.

    Always check, but anything Money saving Expert contains in their recommendations table will have the 85k FSCS cover, so being a smaller lesser known name bank shouldn't be a worry.
    Thanks again ...

    I'd skipped over Martin's "Top Fixed Term Savings" list on the assumption that one couldn't access funds until the end of the term. Perhaps Martin could add a "Top Fixed Term Savings for Monthly Income"? - but I digress ...

    Looking through the list of 1 year fixes today, Smart Save and Cynergy Bank are clear that interest is paid at maturity only. For Atom Bank you can have interest paid monthly but, as far as I can tell from reading the material provided, you can't access said interest before the end of the term. The same appears to apply to the Kent Reliance 2 year bond.

    Of the established names, Tesco Bank at 5.85% AER looks promising and is clear that you can have monthly interest paid to a separate account (so monthly income) and then there is, of course, NS&I at 5.12% AER.

    I will investigate and discuss with SWMBO ... ;)
    I have Atom and Kent Reliance fixed rate, no access to the principal savings bonds that pay interest away every month to my nominated current account.

    From Atom's FAQs: "You may choose to have interest added to your account (‘paid in’) or paid into your nominated account, which is another bank or building society account in your name (‘paid out’)."

    https://www.atombank.co.uk/help/faqs/

    Ok, that is true - it's not that I doubted you it's just taken me an age to find the relevant entry in the FAQs and one needs to know the terms Atom use - namely 'paid in' and 'paid out'. No bonus points to Atom for clarity!

    Atom limits you to a total investment of £100k. You can only fund you Atom account via the faster payments service of your own bank and you are limited to doing so within "an initial seven-day deposit window" - which might be problematic if your own bank finds that prospect a bit scary. And then there is no 'cooling off period' so you can't get funds deposited in error back again until maturity.

    Options on maturity seem fine, and the interest rate is attractive ...
    I've used Atom for years and had no issues either with or making transfers to it.
  • philip42h
    philip42h Posts: 20 Forumite
    Eighth Anniversary 10 Posts Name Dropper Combo Breaker
    BooJewels said:
    I was going to give you a list of the ones I knew that paid monthly interest away, but on looking, many of them either aren't currently competitive, or aren't currently on sale - but that may change at any day.

    I have such accounts with Charter Savings Bank, FirstSave, Ford Money (currently 5.89% for monthly paid).  Also check Vanquis, Aldermore, Hodge, Recognise Bank - maybe also Shawbrook.
    Thanks to all those who responded to my original query. These are some of the things I have learned.

    I had originally looked at NS&I because it was the only source I found boasting a monthly income scheme. That clearly isn't the case as there are many alternatives, with better rates, but they aren't quite so easy to find. The "best buy" sites simply don't list them all ... (Ford Money being a case in point - the rates look very competitive, but they don't necessarily get listed?)

    They each have their own 'quirks' in terms of managing the account, providing the initial funding and default actions on maturity. The NS&I 'gotcha' for the unwary is that they will simply lock your investment away in a fixed term account at a very unattractive rate if you don't take action on maturity. It's not really an issue, but the investor does need to be aware and wary.

    For investments within the applicable Faster Payments limits I suspect that each of these products is equally accessible. And for the more 'active' investor spreading smaller amounts between institutions may well be a good way to go. When attempting to invest larger sums one needs to be aware of the Faster Payments Transaction Limits imposed by one's own bank, and, in turn, the impact that these have in building up the necessary lump sum, in the right place, to purchase the bond.
    Philip
  • philip42h said:
    I presume she is going to be adding £2,880 to a pension each year to get the £720 tax relief and if she has limited income will also apply for Marriage Allowance.
    Yes to the first, probably, as it's 'free money' after all, and no to the second as it's not applicable - she's a kept woman ... ;)

    That's usually a situation where it makes perfect sense for her to apply.

    Or are you a higher rate taxpayer who won't be avoiding higher rate tax by additional pension contributions?
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