2 Questions about 'bonds' - fixed term, fixed interest accounts

thebeak

Hello,
1) Are bonds government backed like ISAs? so you are limited how many you can have in a tax year, and other restrictions?

2) If a provider states that no withdraws or early closures are allowed, does this mean there is literally no way you can access the money if you really really needed to?

Thanks for reading

ManAtHome

Most "bonds" are just fixed-rate savings accounts - if they're not marketed as ISAs, no restrictions as to how many you can have. Standard backing is £35k per provider, but you need to be aware of groups using the same banking licence - quite a few of them run accounts for other people (eg I THINK AA, Saga, BM, Halifax are on the sam license).

Most have have some clawback of interest for early closure - that's why they're giving you a good rate - you need to check the terms and conditions (T&Cs). A few allow partial withdrawals, but most will have penalties.

cheerfulcat

thebeak wrote: »

Hello,
1) Are bonds government backed like ISAs? so you are limited how many you can have in a tax year, and other restrictions?

" Bonds" as sold by banks are not really bonds but fixed term deposit accounts. There are no restrictions bar those imposed by the bank/building society.

Bonds issued by government are called gilts.

ISAs are not ( except for the NS&I offering ) government-backed.

2) If a provider states that no withdraws or early closures are allowed, does this mean there is literally no way you can access the money if you really really needed to?

Normally access before the end of the term is allowed, subject to loss of interest.

JDinho

thebeak wrote: »

Hello,
1) Are bonds government backed like ISAs? so you are limited how many you can have in a tax year, and other restrictions?

2) If a provider states that no withdraws or early closures are allowed, does this mean there is literally no way you can access the money if you really really needed to?

Thanks for reading

A Govt Bond (Gilt) is an Asset, An ISA is a Tax Wrapper - Apples & Pears! You buy a Gilt, you can hold it within an ISA.

If there are no withdrawals you will be hit with receiving no interest or a early redemption penalty - depends on the ASSET in question.

dunstonh

Argh. My pet hate of the banks marketing departments using the term bond incorrectly. As already mentioned, their correct name is fixed term deposits. Bonds are something different but banks and building societies seem to have this fascination with the term bond.

hra_2

cheerfulcat wrote: »

Normally access before the end of the term is allowed, subject to loss of interest.

Is there any firm evidence of this in those cases where the bank/building society does explicitly say that early withdrawals are not allowed, as per the OP's question? Many fixed-term "bonds" do have a widthdrawal clause but there are some important exceptions.

Taking Birmingham Midshires as an example, the summary information says "Access not permitted for term"
http://www.askbm.co.uk/savings/t/fixed/intro.asp

and the Ts&Cs say "Additional withdrawals and closures will not be allowed during the term of the investment, except in the event of death of an investor."