10 year fixed term saving account

JonesM

Hi all
I would like to lock away my savings for 10 years. At this point I will retire and have a smaller income. Then the interest incurred will not take me over the 50k 40% threshold.
Is anyone aware of such products?
Longest I have found is 7 years.
Or are there other similar products out there?
Basically want to defer any interest for 10 years, but don’t want to be exposed to market fluctuations. 

Many Thanks

Flugelhorn

honestly you can't be sure what the tax thresholds will be at that stage or the tax rate or interest rates  - similarly the financial institutions have to react to the market and worldwide / national interest rates. Maybe someone would offer you something for 10 years but it might be really low as they hedge their bets - you could be desperate to get the money out in 4-5 years if rate were going up 

premium bonds?

wmb194

JonesM said:

Hi all
I would like to lock away my savings for 10 years. At this point I will retire and have a smaller income. Then the interest incurred will not take me over the 50k 40% threshold.
Is anyone aware of such products?
Longest I have found is 7 years.
Or are there other similar products out there?
Basically want to defer any interest for 10 years, but don’t want to be exposed to market fluctuations. 

Many Thanks

Ten year, no access savings bonds are extremely rare. The last I've been aware of was one with Leeds BS but that one paid interest away either monthly or annually so you cannot rely on them to give you a lump sum interest payment on maturity.

You could consider gilts instead. Not technically locked up as you could sell during London market hours but they'd give you certainty and capital gains are tax free. TG35 0.625% matures in 2025, it won't pay much interest along the way and the bulk of the return will be CGT free at maturity.

You buy and sell gilts via a stockbroker e.g., AJ Bell, Hargreaves Lansdown, iWeb (part of Lloyds).



https://www.yieldgimp.com/

InvesterJones

You can buy a gilt. They're available for anything from 1 month to almost 50 years. If you choose a low-coupon one then nearly all of the 'interest' is in capital gain, which is currently exempt from tax anyway. Currently a ~10 yr one would have paid the equivalent of 4.58% gross per annum, with most of that capital gain at redemption.

The 4.58 is the locked in rate - but you can also sell early before redemption if you have to, at which point your return to date might be more or less.

aroominyork

You could buy a gilt - a loan to the UK government - which matures in about ten years. They return about 4.5% and, in broad terms, you can choose between one which pays interest every six months during the ten years, or one where you receive a small bit of interest each six months and a lump sum (tax free) gain when it matures in ten years. 

JonesM

Agree, I did see a 10 year one but the rate was 2.1%. It is hardly worth it. I might as well pay the 40% tax on it.
Thanks for the reply.

JonesM

Looks like gilt are a popular suggestion. I will take a look. I have a ii account, see they offer them. I will do my research first to see if they suit what I am trying to achieve. Many thanks for all your reply’s didn’t expect so many this quickly.

InvesterJones

JonesM said:

Looks like gilt are a popular suggestion. I will take a look. I have a ii account, see they offer them. I will do my research first to see if they suit what I am trying to achieve. Many thanks for all your reply’s didn’t expect so many this quickly.

Ha! I think it was a case of there being an obvious solution so we all suggested it at the same time

EthicsGradient

JonesM said:

Agree, I did see a 10 year one but the rate was 2.1%. It is hardly worth it. I might as well pay the 40% tax on it.
Thanks for the reply.

From the list above, the one that would help you the most is TG35. It pays a small amount subject to income tax each year (0.625%), so you'd get 0.375% after 40% tax, but you pay £67.41 to get £100 on 31st July 2035 (which is subject to neither income nor capital gains tax). I don't think you'll find anything better suited to your needs.

JonesM

Thanks all, from all the comments I understand the screen shot, plus the maths.
one last question.
I have over 85k to invest. Do I need to split my investment between different brokers, to get the FSCS protection. Or do I own the bond and there it doesn’t matter if the broker goes bust. Hope that makes sense.

dharm999

Why does that gilt in particular not give rise to CGT when redeemed in 2035?  I thought all were, so keen to understand why that one doesn’t.

Thanks