Childrens Bonus Bonds

Published / Last Updated on 20/01/2015

Video explains National Savings and Investments Children's bonus bonds, 5 year, fixed rate, tax free investments for children.


“Hello there. Phew, it’s January, it’s the sun, I’ve got sun in my eyes, it’s a miracle. Continuing my theme for children's savings: Children's Bonds, National Savings and Investments children's bonds. Children’s Bonus Bonds.

Okay how do they work? So as per previous [videos] in my children’s saving series I’ve covered some other national savings products already. So national savings: fundamentally backed, guaranteed by Her Majesty’s government, so nice and safe and secure.

Children's bonds: the way they work is national savings periodically issue new ‘issues’ of children's bonds and at the time of shooting, January 2015, the current are five-year fixed rate of interest is 2 and 1/2% tax free, so that’s 2.5% tax-free for the current issue appreciating you may be watching this video later on down the line and we may have moved on to a different issue.

But in simplistic terms children's bonds:

  • five year fixed rate bond
  • the interest is added at maturity there may be a bonus added as well if you hold to maturity
  • they can be cashed in early but there maybe some penalties and loss of interest there, things like that and
  • in terms of maximums and minimums: minimum £25 maximum £3,000 per issue like I say, so if we move on to a different issue you can consider dropping some more in for your child or grandchild
  • the child has to be below the age of 16 and
  • whilst they are below the age of 16 it technically is invested in the name of the parent or guardian but nominated for the child so, as per previous with premium bonds, it is in the name of Mr Bloggs or Mrs Bloggs but for the benefit of Junior Bloggs so held separately for them

[And] that's fundamentally what a children's bond is: five-year fixed rate investment, tax-free, for a child nominated, so usually in the name of parent or guardian and nominated for the child.

It is tax-free, you can withdraw, encash early, there maybe some loss of interest or penalties, likewise if you hold to the full five-year fixed term maturity there may be a bonus payable but backed by National Savings and Investments, ultimately, like I say, protection thereof Her Majesty's government.

So as part of any portfolio I’ve covered the range of different types of investment for your children and certainly you should think about considering children's bonds from National Savings. Thanks very much for watching.”

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