Income Bonds

An income bond gives you a monthly income from your investment.

The bonds are sold in multiples of £1,000, but you must invest at least £8,000 and the interest rate at the time of writing is 10.9 %. The income is paid monthly and can be credited direct to a bank or building society account.

The interest rate is not fixed so your income will change as the rate goes up or down. You must give three months' notice to cash in a bond and you can cash them in only in multiples of £1,000.

If you cash in within the first year, you get only half the interest rate.

Index linked bonds are similar except that the income is calculated at 8% in the first year and then in each subsequent year it is increased so that your monthly income keeps pace with inflation. The bonds are sold in multiples of £1,000, but there is a minimum holding of £9 ,000. The capital is not protected against inflation. After ten years the capital is repaid to you if you have not already withdrawn it.

You can obtain the forms and addressed envelope to apply for bonds from a post office where you will also find downloads about them.

Further reading - Deposit Bonds

or Investment Account

Deposit Bonds

/investments/index.php... see: Deposit Bonds