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NS&I Income Bond glitch

Saving | National Savings

By Justin Modray, published 12 January 2010.
Helpful? 1

National Savings & Investments (NS&I) has revealed that around 8,000 Income Bond holders have yet to receive their January income payment, which was due on 5 January, because of a technical glitch.

NS&I is writing to affected customers (but not enclosing a cheque) to inform them they can expect their payment soon, but cannot yet confirm the date.

This is a major inconvenience for those customers who rely on the interest payments to pay their bills and other living costs. I hope NS&I recognise this and make a token goodwill gesture to those affected.

If you’re one of the 270,000 or so people who own Income Bonds then now would be as good a time as any to make sure you’re getting an attractive deal.

The bonds, which pay a variable rate of monthly income, currently offer 1.71% AER gross for savings under £25,000 and 2.02% AER above. These rates are reasonable, but you can get better elsewhere.

Skipton Building Society currently pays 2.69% AER gross on its Web Saver account with monthly income, worth almost £100 a year more on a £10,000 balance.

If you’re a taxpayer then the Standard Life Direct Cash ISA offers variable tax-free monthly interest at 2.65% AER (equivalent to 3.31% gross for basic rate taxpayers (brt) and 4.41% for higher rate (hrt)) . And, if you’re happy to tie up cash, Nationwide is paying 3.71% AER (4.63% brt 6.18% hrt) on its 3 year fixed rate Cash ISA and 4.49% (5.61% brt 7.48% hrt)) on the 5 year version.

While NS&I Income Bonds are unlikely to ever be a ‘worst buy’, they will probably never trouble the ‘best buys’ either. If you have a reasonable sum invested then moving to a more competitive rate is likely to be worth your while, especially if you’re a taxpayer with an available cash ISA allowance.

Update 15 January: NS&I has confirmed that the January income payments will be made on 5 February alongside the normal February payment. They will also pay interest on the amount owed equivalent to 8% a year (equal to 6p gross per £10 owed) and refund any bank charges incurred as a direct consequence of the delay. If you have queries call NS&I on 0500 007 007.

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