Friday, June 14, 2019

National Savings - The Right Option For You?

When we deal with new clients, we encounter Premium Bonds frequently, but it's not very often that we see the many other products offered by National Savings and Investments (NS&I).

Some NS&I returns are currently looking quite attractive, and so it is worth perhaps looking at two such investments, Premium Bonds and Savings Certificates.

The purpose for NS&I offering savings accounts and bonds is to raise money for the government. The various offerings range from tax free to taxable, and of course are safe havens for your cash as they are backed by the UK Government.

Around a quarter of all the money invested in NS&I is held in Premium Bonds. Of course, strictly speaking, they are not investments as they are based not on earning interest but effectively a lottery in the form of a monthly prize draw.

Of course this means that you may be lucky, or not. The chance of you winning equates to a rate of 3.8% tax free.

But you are only risking the interest not the capital.

For a higher rate taxpayer assuming income tax at 40%, this is an equivalent rate of 6.33% gross.

Now let's look at Savings Certificates.

One of the problems for higher rate taxpayers is having a large chunk of their gains taxed at 40%. One of the major benefits of Savings Certificates is that they are tax free.

The fixed rate Certificate, for example the 2 year option, pays 3.95%. This comes out at 6.58% for a higher rate tax payer and 4.94% for a basic rate payer. There is also a 5 year option, which is currently paying 3.85%.

Turning to index linked certificates, the picture looks even more attractive. Due to increasing inflation, judged for these purposes to be 4.5%, the 3 year issue returns 1.35% above this. This gives a net return of 5.85% p.a. and a gross equivalent for a higher rate taxpayer of 9.75%! The rate is also the same for the 5 year product.

 You can invest from £100 to £15,000 per issue, with no limit on reinvesting matured Certificates.

You can learn more about NS&I at

The Key Considerations: 

Ensure that you take into account all the rates and products out there, particularly if you pay higher rate tax. NS&I could be ideal for you, especially if you are in a phase of your life where you don't need to take any risk with your capital.

Now could be a good time to review all your cash and bond based investments.


Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives. Click here for Financial Advice for UK Doctors and Dentists and to get your free retirement guide, How To Avoid The 7 Most Common Retirement Planning Mistakes. Rutherford Wilkinson plc is authorised and regulated by the Financial Services Authority:

Sunday, May 12, 2019

Features of bonds

The most important features of a bond are:

Nominal, principal or face amount — the issuer pays interest on this amount, and it is the amount which has to be paid back at the end. Redemption amount exist in some structured bonds which is different from the face amount and can be connected to performance of particular assets such as a stock or commodity index, FOREX or a fund.

Issue price — investors buy the bonds at this price when they are first issued, which will be approximately same value as the nominal amount. The issue price is the net proceeds that the issuer receives, and it is less than issuance fees.

Maturity date — the issuer has to repay the nominal amount on this date, the issuer has no more obligations to the bond holders after the maturity date as long as all payments have been made.

In the market for U.S. Treasury securities, There are three groups of bond maturities:

  • Short term (bills): Short maturities up to one year;
  • Medium term (notes): Medium maturities between one and ten years;
  • Long term (bonds): Long maturities greater than ten years. 

Coupon — the interest rate paid to the bond holders by the issuer. This rate is typically fixed throughout the life of the bond. It can also be variant with a money market index, such as LIBOR, or it can be even more exotic.

Indentures and Covenants — the terms of a bond issue is established through an indenture which is a formal debt agreement, while covenants are the terms of such an agreement. High yield bonds the credit rating agencies rate these bonds below investment grade. Investors expect to earn a higher yield because these bonds are more risky than investment grade bonds. These bonds are also called junk bonds.

Coupon dates —the issuer pays the coupon to the bond holders on this date. Most bonds are semi-annual in the U.S. and also in the U.K. and Europe, so they pay a coupon every six months. Optionality: an embedded option may occasionally exist among a bond terms; meaning that it grants option-like features to the holder or the issuer:

Callability — an optional date on which the issuer has the right to repay the bond before the maturity date; these bonds are called callable bonds.

Putability — It is a bond given right to the holder so as to force the issuer to repay the bond before the maturity date on the put dates; (Note: "Putable" refers to an implicit put option; "Puttable" means that it may be putted.

Call dates and put dates— callable and putable bonds can be redeemed early on that date.

Convertible bond bondholder is allowed to exchange a bond through it to a number of shares of the issuer's common stock.

Exchangeable bond exchange to shares of a corporation other than the issuer is allowed through it.


James is an expert in writing about legal forms and documents that may help you when your in the search of the right legal document. He writes many articles about forms ranging from, power of attorney forms, landlord tenant forms, and almost any legal form that your searching for.