Advantages No risk product with a reasonable chance of decent returns
Disadvantages It is not as good as it seems at first glance
National Savings & Investment Guaranteed Equity Bond
It sounds too good to be true. so, how good is it Really?
Basically, the UK government. This has the advantage of being considered to be free of the risk of going under, unlike a bank, adding an extra layer of security to your money! National Savings are the UK's second largest savings institution, only Halifax looks after more of the country's money.
£2,000 is the minimum investment. £1m is the maximum, although this is doubled for joint holdings. Strangely, neither Mrs Daveops or myself is going to be troubled by the upper limit.
No. This is a 5 year investment maturing in june 2008. the only way you can get to the money within that term is to die! You cannot add to a bond during its term, although you are allowed to hold up to 5.
No. All gains made are subject to UK Income Tax. In other words, the gains made will all be liable for tax in the 2008/9 tax year. This can have its advantages. if you think that you will pay a lower rate of income tax in 2008/9 than you do now (eg retirement, planned career break or family etc) this can be an excellent way of deferring the tax bill. There will, however, be 5 Budget's between now and then for Chancellors to change tax rules and blast any prudent planning on your part to smithereens! If you anticipate returning to the workplace or moving up a tax bracket in the 5 year period, you could get stung for a higher tax bill! Interestingly, the interest will be paid gross (without tax deducted) and you will need to declare the income on your tax return. the gains are treated purely as income and are not subject to capital gains tax. gains made from "real" dealing in stocks and shares are subject to capital gains tax. it may well prove more tax efficicent to realise a capital gain in 2008/9 rather than get a big income tax bill. You need to know your own circumstances and trust the government to know for sure!
Not directly. but you can take out a bond in trust for a minor. Seek professional advice regarding the taxation of income for a minor after checking out the rules in www.inlandrevenue.gov.uk.
First of all, the investment runs from 17th June 2003. If you invest prior to this date, you will earn 3.25% pa (gross taxable) on your money up to 16th June 2003. The full amount is then invested.Secondly, you cannot lose capital. While the return on this bond is linked directly to the FTSE100 index, if the FTSE should fall, you will get back your initial investment. Remember, if you had chosen to invest in a normal bank savings account, you would have earned interest. In this scenario, you have risked the interest you would have earned for no gain.
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