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Childrens Bonus Bonds
Member Name: HotBabes
Advantages: Soon add up, makes an ideal present, tax free
Disadvantages: money tied for 5 years, interest rates change
National Savings do some good investment products and some not so good, this review concentrates on CHILDRENS BONUS BONDS.
Firstly I have to say, please do NOT get these confused with the Governments relatively new Child Trust Fund (sometimes known as Baby Bonds) or Premium Bonds. They are not connected in any way.
Childrens Bonus Bonds are not advertised and therefore sometimes forgotton about as an 'alternative' gift or to help you save for your childs future.
How many times have we all spent an amount of money on a present for your child/neice/nephew or friends children only for it to be outgrown in a few months? .
Or perhaps Nanny & Grandad want to invest some money for their grandchildren?
During the first few years of my sons life, I was given a fiver here and a fiver there from various relations to 'get him some sweets' or buy him something nice! Well I don't know about you but babies/toddlers and young kids have nearly everything these days and I didn't want to spend the fiver just for the sake of it.
I wanted an alternative to a Building Society account as the account would have to be in my name as 'trustee', therefore attracting tax. With National savings, the bonds are in his name, with myself as the guardian and I can automatically re-invest for another 5 years.
Whilst there are other investments out there with maybe a higher return, Childrens Bonus Bonds can be bought by the relative/friend as well rather than giving the actual money to the parents to invest on their behalf.(so if you were thinking of spending it yourself - hard luck!)
HOW THEY WORK
National Savings products can be purchased through any post office.
The bonds can be bought in units of £25.00 up to a maximum of £1,000 in each Issue and are invested for a 5 year period. Please note however that new Issues come out regularly (usually yearly) and therefore this maximum level doesn't really cause any problems. Well, not for me anyway!
The application form from the P.O. is very straightforward and basically contains four sections.
You are required to enter the childs details , name, residential address and date of birth etc.
Name and address of parent/guardians. This is who will be the 'Resonsible Persons' for looking after the Bond(s) until maturity.
Your name and adress, and your relationship to the child.So if you are a nanny/auntie etc, you would enter this here, if not then leave blank.
How many units you wish to purchase, method of payment and a signature and date.
The P.O. will check the form and issue you with a receipt but the actual Bond is issued by National Savings and is sent out within 28days.
The Bonds themselves are very easy to read and contain the following info :
Your customer/holder Number which is unique to yourselves and can be quoted on any further purchases/queries.
The Bond Number
Amount of Units Purchased e.g. 1
The Anniversary date and Value of Bond at that date (inc interest and bonus) FOR EXAMPLE ONLY
28th Dec 05 Value £25.00
28th Dec 06 £29.43
28th Dec 07 £31.96
28th Dec 08 £33.78
28th Dec 09 £36.87
FIVE YEAR ADDED BONUS £4.21
If you leave the Bond for the full five years they add on a bonus.
The Rate of Interest is whatever the current savings rate is at the time of Purchase, the Post office can advise you) and this remains unchanged for the five years.
A nice little touch at the bottom says 'A Gift from Mrs Jo Bloggs' (which is why they ask for your details) so one day the child will know what Nanny/Auntie did with her money!! However, should you not wish for your name to appear, then it can be left blank or you can just put the parents name.
THE 'NITTY GRITTY' BIT NOW !
Bonds can be purchased for anyone under the age of 16.
They are held for 5 years at a time and towards the end of the five years National Savings automatically write to you detailing the Value of the Bond over the coming 5 years and the Rate of Interest. Therefore its wise to notify them of your new address should you move. Should you wish to re-invest, do nothing. If you wish to cash in the Bond then the reverse of their letter is printed with a Request for Payment form.
Rates and Bonuses are guaranteed.
The bonds can be re-invested earning interest and bonuses until the child reaches 21. No interest is earned on the Bonds once the child reaches his/her 21st birthday.
Once a Bond holder reaches 16 years of age only they can apply for repayment.
Bonds can be cashed in before the end of the five year period with interest but if it is cashed before the first anniversary then no interest is earned.
PLEASE advise National Savings of any change of address so you always receive the re-investment notification.
I think that £25.00 is not too large a sum for someone as a gift. Sometimes I have put the money away until I have had £100 and then bought 4 units. I like the flexibility of the amount and the fact that that you can buy one each birthday/Christmas if you wanted to.
My son has a fair few of these now and no doubt will continue to get a few more over the next couple of years. He knows he has these Bonds but being an undecided teenager is not too sure if he will use them towards driving lessons, a car, or towards his Uni fees!
Besides myself, Bonds have been purchased for him by his Grandma & Grandad who live in France. They can just send off the application with their cheque (in GBP). It saves having to post a large parcel or any worrying about whether the jumper/jeans will fit etc and at the same time know the money from the Bond will be more useful to him.
I prefer to buy a Bond than put the money into the Building Society as the interest rate will remain the same throughout the five years. Also there is no tax and as these Bonds are in the childs name, its saves any trouble from the Inland Revenue thinking the interest belongs to you just because you happen to be a named person on a Building Society?Bank Account.
I think its great that friends/family can purchase these direct. In this day when kids have everything it makes a change to know the money you spent wil lbe put to good use ...hopefully and eventually!
I have been dealing with National Savings for 13 years and have never had to contact them. All the notification letters have been sent without fail.
Rates obviously vary so please check first.
I hope this simple explanation of the Bonds helps but for further and more detailed info, Application forms and explantory notes you can ask at any Post Office or contact National savings direct at :
National Savings & Investments
Enquiries on 0845 964 5000.
Thanks for reading!
Summary: An alternative Saving Plan