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  • FIRST POST
    • RG2015
    • By RG2015 1st Dec 17, 5:43 PM
    • 1,275Posts
    • 753Thanks
    RG2015
    NS&I 3 Year Bond 2.20%
    • #1
    • 1st Dec 17, 5:43 PM
    NS&I 3 Year Bond 2.20% 1st Dec 17 at 5:43 PM
    I have just noticed that NS&I are now offering a 3 year bond at 2.20% with a maximum of £1 million per person. This is in addition to the 3 year 2.20% bond that is limited to £3,000 per person.

    I assume that this is new as it it not listed on the main MSE savings page. It is though surprising that there has been no publicity about this.

    There are also some other new 1 and 3 year bonds with quite good rates.
Page 2
    • norricorp
    • By norricorp 6th Dec 17, 3:09 PM
    • 14 Posts
    • 4 Thanks
    norricorp
    As someone commented on the article, surely it is better to take the 3 year option and cash in after year and lose 90 days interest. 0.75 of 2.20 is greater than 1.5.
    • jimbow25
    • By jimbow25 6th Dec 17, 4:39 PM
    • 320 Posts
    • 113 Thanks
    jimbow25
    I crunched the numbers and taking into account the 90 day interest penalty, for a 2.2% bond it amounts to the following effective AERs if you withdraw early

    6 months 1.10%
    1 year 1.66%
    1 year 6 months 1.84%
    2 years 1.93%
    2 years 6 months 1.99%
    3 years (minus a day) 2.02%

    Seems like a good bet? Even if rates do go up and you want to break it and re-invest.
    Last edited by jimbow25; 06-12-2017 at 4:41 PM.
    • Krb2609
    • By Krb2609 10th Dec 17, 5:44 PM
    • 2 Posts
    • 1 Thanks
    Krb2609
    Ok, so 1.5% for 1 year, 2.2% for 3 years, but take your money out anytime for 90days loss of interest.

    So if you want to invest for a year, surely: invest for 3-years, take your money out early after 12 months and earn 9 months interest at 2.2% - which equates to 1.65%, in other words 10% higher return than the 1-year deal.

    Is my maths wrong or theirs????
    • RG2015
    • By RG2015 10th Dec 17, 6:13 PM
    • 1,275 Posts
    • 753 Thanks
    RG2015
    Ok, so 1.5% for 1 year, 2.2% for 3 years, but take your money out anytime for 90days loss of interest.

    So if you want to invest for a year, surely: invest for 3-years, take your money out early after 12 months and earn 9 months interest at 2.2% - which equates to 1.65%, in other words 10% higher return than the 1-year deal.

    Is my maths wrong or theirs????
    Originally posted by Krb2609
    NS&I = State owned savings bank.

    Do we rely on the UK Govt to do maths accurately?

    Oh, and yes, who on earth would choose 1 year in this scenario?
    • RG2015
    • By RG2015 16th Dec 17, 4:23 PM
    • 1,275 Posts
    • 753 Thanks
    RG2015
    I crunched the numbers and taking into account the 90 day interest penalty, for a 2.2% bond it amounts to the following effective AERs if you withdraw early

    6 months 1.10%
    1 year 1.66%
    1 year 6 months 1.84%
    2 years 1.93%
    2 years 6 months 1.99%
    3 years (minus a day) 2.02%

    Seems like a good bet? Even if rates do go up and you want to break it and re-invest.
    Originally posted by jimbow25
    Definitely a good bet. Rates in the main are currently static or falling. Can anyone see three year rates rising much above 2.20% in the next year
    • capital0ne
    • By capital0ne 16th Dec 17, 4:39 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    What a strange name 'Guaranteed growth bond', how the hell did they come up with that? 2.2% less 40% tax = 1.32% net nominal growth, but less inflation = at least -0.5%! Guaranteed to lose in real terms bond' would have been far more apt. Or am I missing something?
    Originally posted by chucknorris
    Quuite easy to work that out. I would have thought any higher rate tax payer could work that out for them selves
    • Puddylove
    • By Puddylove 17th Dec 17, 1:13 AM
    • 488 Posts
    • 792 Thanks
    Puddylove
    I'm thinking of moving my emergency fund of 3 to 6 months' pay into the Guaranteed Growth Bond.
    Am I missing something or does this sound like a good plan?
    • Audaxer
    • By Audaxer 17th Dec 17, 9:34 AM
    • 1,087 Posts
    • 637 Thanks
    Audaxer
    I'm thinking of moving my emergency fund of 3 to 6 months' pay into the Guaranteed Growth Bond.
    Am I missing something or does this sound like a good plan?
    Originally posted by Puddylove
    If you put your whole emergency fund in the bond and then an emergency occurs within the next 3 months and you need to draw out the lot, you would have to pay 3 months interest, so you would lose some capital. My view would be to put some of the emergency fund in the bond, but still keep some of it in instant access funds.
    • 2010
    • By 2010 17th Dec 17, 1:06 PM
    • 4,189 Posts
    • 3,339 Thanks
    2010
    Can I withdraw money?

    Yes, before the end of the term you can cash in all or part of your Bond online, by phone or by post with no notice. We will deduct a penalty equal to 90 days!!!8217; interest on the amount you cash in. This means that if you cash in within 90 days of buying your Bond, you!!!8217;ll get back less than you invested. You need to keep a balance of at least £500 to keep your Bond open.

    At the end of the term you can cash in with no penalty. We!!!8217;ll contact you about a month before the end of the term to let you know the options available at that time.

    If my maths are correct you could draw out £10k anytime and it would cost you £54.
    Last edited by 2010; 17-12-2017 at 1:09 PM.
    • 2010
    • By 2010 17th Dec 17, 2:22 PM
    • 4,189 Posts
    • 3,339 Thanks
    2010
    Trying to see how to fund the bonds, is it by FP from a current account?
    • ColdIron
    • By ColdIron 17th Dec 17, 2:44 PM
    • 4,273 Posts
    • 5,409 Thanks
    ColdIron
    "invest at least £500, paid by a debit card in your own name, issued by a UK bank"
    • durhamviper
    • By durhamviper 17th Dec 17, 2:47 PM
    • 23 Posts
    • 18 Thanks
    durhamviper
    Trying to see how to fund the bonds, is it by FP from a current account?
    Originally posted by 2010
    You buy them from your account on the NS&I site not by FP from bank account
    • RG2015
    • By RG2015 17th Dec 17, 2:51 PM
    • 1,275 Posts
    • 753 Thanks
    RG2015
    Trying to see how to fund the bonds, is it by FP from a current account?
    Originally posted by 2010
    "invest at least £500, paid by a debit card in your own name, issued by a UK bank"
    Originally posted by ColdIron
    You buy them from your account on the NS&I site not by FP from bank account
    Originally posted by durhamviper
    The whole process is very easy.
    • 2010
    • By 2010 17th Dec 17, 3:02 PM
    • 4,189 Posts
    • 3,339 Thanks
    2010
    Just been to the NS&I site and logged in.
    As pointed out you pay by a UK debit card.
    I would imagine they take the payment immediately.
    So I`ve held off until tomorrow to be sure all the funds are in place in my current account.
    • MDMD
    • By MDMD 17th Dec 17, 5:46 PM
    • 298 Posts
    • 160 Thanks
    MDMD
    Can I withdraw money?

    Yes, before the end of the term you can cash in all or part of your Bond online, by phone or by post with no notice. We will deduct a penalty equal to 90 daysí interest on the amount you cash in. This means that if you cash in within 90 days of buying your Bond, youíll get back less than you invested. You need to keep a balance of at least £500 to keep your Bond open.

    At the end of the term you can cash in with no penalty. Weíll contact you about a month before the end of the term to let you know the options available at that time.

    If my maths are correct you could draw out £10k anytime and it would cost you £54.
    Originally posted by 2010
    Someone else already pointed this out but Iíve been looking at the terms on encashment (and it is not clear) which seem to suggest that they donít net the penalty off the interest, but will calculate it as separate charge. This may mean that you will pay tax on the full interest amount but not receive that amount.

    63. The amount due when a Bond is cashed in between anniversary dates will be the capitalised value of the Bond (see paragraph 14) (or the original Bond value if the Bond has been held for less than one year) plus interest earned at 1/365th of the annual interest rate for each day held since the last anniversary date (or date of investment if the Bond has been held for less than one year) less any penalty deducted (see paragraphs 50 and 51).
    • IanManc
    • By IanManc 17th Dec 17, 5:52 PM
    • 544 Posts
    • 886 Thanks
    IanManc
    Someone else already pointed this out but Iíve been looking at the terms on encashment (and it is not clear) which seem to suggest that they donít net the penalty off the interest, but will calculate it as separate charge. This may mean that you will pay tax on the full interest amount but not receive that amount.
    Originally posted by MDMD
    Doesn't it mean that you receive your interest and pay tax on it, but you also pay a penalty?

    Clearly the penalty is deducted from capital, because if you cash in within the first three months then you get back less than you invested. In such a case you'd incur the penalty plus you'd be liable for a small amount of income tax on the interest you'd accrued.
    • traineepensioner
    • By traineepensioner 17th Dec 17, 7:08 PM
    • 253 Posts
    • 129 Thanks
    traineepensioner
    If you put your whole emergency fund in the bond and then an emergency occurs within the next 3 months and you need to draw out the lot, you would have to pay 3 months interest, so you would lose some capital. My view would be to put some of the emergency fund in the bond, but still keep some of it in instant access funds.
    Originally posted by Audaxer
    You could split your emergency fund to buy a number of 3 year bonds, so that if cash was needed you would only need to cash in one or more bonds.
    I've just bought 4 growth bonds of varying amounts. If I need some ready cash for an emergency I will only lose the 90 day interest on the bonds I need to cash.
    No longer trainee
    Retired in 2012 (54)
    State pension due 2024 (66)
    • RG2015
    • By RG2015 17th Dec 17, 7:33 PM
    • 1,275 Posts
    • 753 Thanks
    RG2015
    You could split your emergency fund to buy a number of 3 year bonds, so that if cash was needed you would only need to cash in one or more bonds.
    I've just bought 4 growth bonds of varying amounts. If I need some ready cash for an emergency I will only lose the 90 day interest on the bonds I need to cash.
    Originally posted by traineepensioner
    You can make a partial withdrawal from a single bond and only lose 90 days interest on the amount you withdraw.

    NS&I Guaranteed Growth Bond Summary Sheet PDF
    Can I withdraw money?
    Yes, before the end of the term you can cash in all or part of your Bond online, by phone or by post with no notice. We will deduct a penalty equal to 90 days!!!8217; interest on the amount you cash in. You need to keep a balance of at least £500 to keep your Bond open.
    At the end of the term you can cash in with no penalty. We!!!8217;ll contact you about a month before the end of the term to explain the options available at that time.
    Last edited by RG2015; 17-12-2017 at 7:39 PM.
    • planteria
    • By planteria 17th Dec 17, 8:51 PM
    • 5,001 Posts
    • 1,110 Thanks
    planteria
    Better than nothing but still losing 0.7% due to inflation - go for stocks and shares instead
    Originally posted by capital0ne
    it's a completely different approach, but i tend to agree. to tie-up money for so long with such little return doesn't make a lot of sense to me. the only product i'm seeing from NS&I that appeals is Premium Bonds - at least they offer a bit of fun, and a change, albeit small, to get a big return.
    • Kim_13
    • By Kim_13 17th Dec 17, 9:07 PM
    • 1,901 Posts
    • 2,035 Thanks
    Kim_13
    Multiple bonds are worth considering if you can stage your investments. That way, hopefully one will be due to mature if you need the money, so no penalty to pay.
    Sealed Pot 11 #520 ~ /£100
    VSP 2018 #9 ~ £19.55/£180.00
    CCCC 2018 #1 ~ £20.75/£180.00
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