National Savings Childrens Bonus Bond

JohnFB

Hi all

I was thinking of buying a lump sum of Children's Bonus Bonds as a longish term investment but the interest rate seems really low - 3.4%.

"Issue 28
For the first 5 years each £25 unit earns 1.90% pa compound. On the 5th anniversary of purchase it earns a bonus of £2.09 (8.36% of purchase price)."

Can anyone suggest anything better than this at the moment.

Thanks

martinman3

NS&I cut the rates on Bonus Bonds quite severely so that probably the only advantages they have are security (but as you can only buy £3000 in each issue it would take twelve issues before you would have more than £35000 in them and the FSCS compensation levels would have changed by then ) and a five year term.

Clydesdale Bank/Yorkshire Bank has a Children's Savings Bond which has a five year term and pays 5.50% AER fixed. http://www.cbonline.co.uk/ or http://www.ybonline.co.uk/

Stroud & Swindon BS has a Children's Bond which has a term ending 15th May 2012 and pays 5.25% AER fixed. http://www.stroudandswindon.co.uk

Cheshire BS have a Black Cat Bond which has a four year term and pays 5.15% AER fixed. http://www.thecheshire.co.uk/

Don't forget to fill in the R85 to get interest paid gross.

All these were found using www.moneyfacts.co.uk and selecting Children's Accounts

JohnFB

Thanks martinman3

I think you're right the only the thing they now offer is security and the rates are better elsewhere.
I'll check out those other options you mentioned.
I was also thinking of the Yorkshire Building Soc, they have a 'Treasure Bond' at 6.00% gross at the moment but I'm not quite sure if this is a fixed rate
and what happens at the end of the year.
http://www.ybs.co.uk/savings/future/treasure/index.jsp

Cheers

martinman3

I thought about putting that on the list, it is fixed on 12 months from the month in which it is opened and is looking like a good deal at the moment. In 12 months time you can either let it run for another 12 months at the rate then in force or cash it in.

debbie42

The treasure bond is only available to open for children up to 12 as well.

JohnFB

Great thanks for your help on this both of you.
One of these accounts looks like the one to go for. :T

JohnFB

Sorry to dredge up this query again, but ...

I want my child to avoid paying tax on his savings, but he already has some money in 2 separate Building Soc accounts and the interest he is getting is over £100 at the moment.

I don't really understand this £100 rule.
Will the BSoc's notice at some point and then only allocate net interest to the accounts.

Would it be better to go with the National Savings and Investments to avoid this problem for the new lump sum that I want to put away for him, at this is tax free - I think.

Thanks for your help

debbie42

JohnFB wrote: »

I don't really understand this £100 rule.
Will the BSoc's notice at some point and then only allocate net interest to the accounts.

The basics are that a child can earn £100 interest p.a. on total cash that has been gifted from one parent. So it's £200 if there are two parents who can have been deemed to have gifted the cash. Note: the interest allowance is per annum, but the total gifts are cumulative over any period.

If the money has come from a grandparent, say, then the £100 limit doesn't apply. We keep good records of cash gifts to our children for this reason.

It's not up to the building society to spot any tax issues based on the above as they have no way of knowing who the cash came from.

JohnFB

Thanks for your reply Debbie.

Once the balance in your child's account has increased over the years due to ad-hoc additions etc, and you don't withdraw any, then there will come a point where the interest will be more than £100 (or £200). So does this mean that from that point on then the account's interest is taxable, forever ?

If so then there must be a lot people in this situation I would think.

I was just hoping to avoid any tax implication for a lump sum to be put in his name. The BS Bonds have a better interest rate but the NSANDI Bond is tax free.

Cheers

debbie42

JohnFB wrote: »

Once the balance in your child's account has increased over the years due to ad-hoc additions etc, and you don't withdraw any, then there will come a point where the interest will be more than £100 (or £200). So does this mean that from that point on then the account's interest is taxable, forever ?

Any interest above the £100 is taxed as if it was the parent's. It isn't a lot, I know. I just ensure that it never does, with money from me or their Dad, to be on the safe side. The last thing I want to do is to be messing around with declaring it on tax returns etc.

martinman3

JohnFB wrote: »

Sorry to dredge up this query again, but ...

I want my child to avoid paying tax on his savings, but he already has some money in 2 separate Building Soc accounts and the interest he is getting is over £100 at the moment.

I don't really understand this £100 rule.
Will the BSoc's notice at some point and then only allocate net interest to the accounts.

Would it be better to go with the National Savings and Investments to avoid this problem for the new lump sum that I want to put away for him, at this is tax free - I think.

Thanks for your help

Did you read this thread too ? http://forums.moneysavingexpert.com/showthread.html?t=853111