Granny Bonds

[towny44]

must agree with ray 3% on up to 20,000 in my Santander current account sounds a lot better to me especially as I am a still a tax payer

I thought they only paid interest on £3000-£20,000, meaning the first £3000 gets no interest, giving a net interest of only 2.55%, which is then taxable, meaning NS&I 2.8% trumps this Santander offer.

[wolfie]

But, you can access your Santander, and similar high interest rate current accounts,at any time. Granny Bonds are tied in for the duration, I think.

AER (variable) interest on balances from £3,000 and up to a maximum of £20,000 .

OK, you can argue that your 3K gets no interest BUT the rest does get a very favourable rate. Just pop in the 20K maximum and there you go... top interest rate on the whole amount.

[Silver_Shiney]

You still pay tax on the other 75%.

If the interest rate is better when either of us turn 65 and are eligible, we may consider them, but until then we are very happy with our diversity of investments.

What would you rather do? Pay tax on the whole pension pot, or take 25% of it tax-free to purchase an investment bond on which you can take 5% pa tax-free, with the prospect of the invested capital appreciating in value?

[towny44]

You still pay tax on the other 75%.

If the interest rate is better when either of us turn 65 and are eligible, we may consider them, but until then we are very happy with our diversity of investments.

What would you rather do? Pay tax on the whole pension pot, or take 25% of it tax-free to purchase an investment bond on which you can take 5% pa tax-free, with the prospect of the invested capital appreciating in value?

I think the point you may be missing Shiney is that most pensioners will have a range of investments already set up, with varying degrees of risk. In our case we are using part of the risk free portion of our investments to buy these "Granny Bonds."

[lioness]

I have actually taken some out of my ISA, paying a measly 1.75% and put it into a Granny Bond for 3 years. 3.2% per year compound interest net is not available elsewhere, so I definitely think it's worth it. Did it over the net, very easily. Yes you can get your money out, you just lose 90 days interest on the amount you want to withdraw.

[Delboy]

You still pay tax on the other 75%.

If the interest rate is better when either of us turn 65 and are eligible, we may consider them, but until then we are very happy with our diversity of investments.

What would you rather do? Pay tax on the whole pension pot, or take 25% of it tax-free to purchase an investment bond on which you can take 5% pa tax-free, with the prospect of the invested capital appreciating in value?

I think the point you may be missing Shiney is that most pensioners will have a range of investments already set up, with varying degrees of risk. In our case we are using part of the risk free portion of our investments to buy these "Granny Bonds."

I understand what both Alan & John are saying.

Just to say, money invested in our investment bond did not come from our pension funds. Our pensions are totally seperate, the tax free income from our bond helping to supplement them.

We received this years annual tax free payment as a lump sum on the 5th Jan, this obviously reduced the total value of our bond by the same amount. In the 15 days since payment, our bond has already recovered that amount and is back to its total value pre payment.

[wolfie]

You still pay tax on the other 75%.

If the interest rate is better when either of us turn 65 and are eligible, we may consider them, but until then we are very happy with our diversity of investments.

What would you rather do? Pay tax on the whole pension pot, or take 25% of it tax-free to purchase an investment bond on which you can take 5% pa tax-free, with the prospect of the invested capital appreciating in value?

We don't intend purchasing an annuity. The funds are for our daughters after we pop off.

[Delboy]

You still pay tax on the other 75%.

If the interest rate is better when either of us turn 65 and are eligible, we may consider them, but until then we are very happy with our diversity of investments.

What would you rather do? Pay tax on the whole pension pot, or take 25% of it tax-free to purchase an investment bond on which you can take 5% pa tax-free, with the prospect of the invested capital appreciating in value?

We don't intend purchasing an annuity. The funds are for our daughters after we pop off.

Just to make it clear our bond is not an annuity, as well as providing a tax free income, we have access to the funds in the bond, in part or as a whole at anytime, it has a cash surrender value equal to the value of bond at the time of surrender.
As we hold the bond jointly, the benefits equal to 101% of the value of the bond will be paid out on death of the last survivor.

[wolfie]

What they don't tell you. To make these accounts work best for you, follow these rules...

a) If you can only do one - do the 3yr. The bond pricing is rather strange. Put cash in the 3yr bond and withdraw after a year and you lose 90 days' interest, but that's still an effective rate of 3.01%, beating the 1yr.

Above, courtesy of Martin Lewis.

[Mervyn and Trish]

Just to update on our Royal Mail gamble --- we looked at these Bonds on opening day and having failed to get past second base on the website, despite several attempts, or to get through on phone, we downloaded the form and sent it off by First Class post, despite concerns about RM's ability to get the same to its destination with any reliability and NS&I opening any mail before Easter. However, the good news is I checked our current account on line today and the cheque has been banked so we now have the 3 year bond. If there are any left when our ISA pays out and restores our current account to a healthy balance next week we'll have another on-line punt for a 1 year Bond.

[kaymar]

But, you can access your Santander, and similar high interest rate current accounts,at any time. Granny Bonds are tied in for the duration, I think.

AER (variable) interest on balances from £3,000 and up to a maximum of £20,000 .

OK, you can argue that your 3K gets no interest BUT the rest does get a very favourable rate. Just pop in the 20K maximum and there you go... top interest rate on the whole amount.

No, wolfie, 65+ bonds are not tied in, you jut lose 3 months' interest on anything you withdraw, still leaving an above-average rate after 12 months.