Financial planning and fixed rate products

National Savings enters the penalty zone
In the middle of August 2012 in just about the middle of the holiday season, National Savings & Investments (NS&I) announced some important changes to its range of fixed rate products. It was an odd piece of timing in more ways than one because in August NS&I had only one fixed rate product generally available – the Children’s Bonus Bond.

No easy exit
The most important change made by NS&I was to introduce early encashment penalties of 90 days’ interest on all new investments in savings certificates (fixed rate and index-linked) and Children’s Bonus Bonds (now renamed Children’s Bonds) from 20 September 2012. Previously such penalties had only applied to guaranteed growth and guaranteed income bonds.

For investment, read reinvestment
Although NS&I have withdrawn both sets of savings certificates and the guaranteed growth and income bonds from public sale, they are still available to existing holders when their investment matures. Indeed, NS&I’s default action is to reinvest maturity proceeds in the latest issue unless the investor requests otherwise. The days of the ‘common extension rate’ and the like are long gone.

At present NS&I are not trying to raise additional monies – their government- set goal is simply to stand still. Unsurprisingly, that means NS&I’s reinvestment offerings are not particularly attractive.

If you have any questions about financial planning, fixed interest rate products and National Savings & Investments, please call 020 3865 2379.


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