Need to boost your monthly income? Why NS&I's new bonds might be the best savings option
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Monthly income-seekers have been given a glimmer of hope by the launch of several top deals.
Last week, National Savings & Investments reintroduced its popular Guaranteed Income Bonds, paying competitive - albeit still low - rates.
Its one-year rate at 1.45 per cent is attractive compared with big banks and building societies - although you can do better with newer banks. The NS&I bonds are also only on sale online.
Monthly income: NS&I has reintroduced Guaranteed Income Bonds
The top one-year fixed-rate on offer for those willing to go online and who want monthly interest is 1.8 per cent from Charter Savings Bank - or £15 a month on each £10,000.
But in the High Street's traditional banks and building societies, the best that you can do is 1.34 per cent (around £11 a month) from Virgin Money, or a much lower 1.19 per cent (just under £10 a month) from Skipton BS.
If you tie up your money for three years, the NS&I 2.15 per cent fixed-rate is the top deal.
On £10,000, it is £12 a month on the one-year deal, or £17.90 a month on the three-year deal.
With rates so low, experts advise against tying in for more than a year, because interest rates are likely to rise in this time and you could lose out.
Economists differ on when the next rise in Bank of England base rate from its current 0.5 per cent will materialise.
Some predict that higher growth in the economy could lead to another rise in interest rates in the next few months.
Paul Hollingsworth, senior UK economist at Capital Economics, says: 'We expect base rate will start to rise in May, with three hikes bringing it to 1.25 per cent by the end of next year.'
He predicts it will rise further, to 1.75 per cent, by the end of 2019.
But forecasters at EY Item Club and Pantheon Macroeconomics don't expect it to budge until late next year.
If you think rates are going to rise, you could go for a so-called tracker bond.
Here, your income will rise if the general level of interest rates goes up during the life of your bond.
The Family BS two-year tracker bond is available online, by post or through its one branch in Epsom, Surrey.
At 2.04 per cent, it is the top two-year deal — or £17 a month on each £10,000.
But if base rate rises, so will your return, as it guarantees to move in line. For example, a 0.25-point rise in base rate would raise your rate to 2.29 per cent, which comes to £19 a month.
Any income you get on fixed-rate bonds could be tax-free, so long as you do not bust your personal savings allowance.
This lets basic-rate taxpayers earn their first £1,000 of interest a year from all their savings (excluding cash Isas) without paying tax. Higher-rate taxpayers get a £500 allowance.
Tax-free cash Isas pay less interest. The best you can do for one year is 1.4 pc from Virgin Money, or 1.71 per cent for two years with Charter Savings Bank.
Easy-access cash Isas are even worse: 1.09 per cent from online bank Shawbrook, or a lowly 0.9 per cent High Street rate from Skipton BS.
For its regular easy-access Isa, Virgin Money pays 1.35 per cent on its Double Take E-Saver — but restricts you to two withdrawals of your capital a year.
In the High Street, the best you can do is Coventry BS's taxable 1.1 per cent.
sy.morris@dailymail.co.uk
THIS IS MONEY'S FIVE OF THE BEST SAVINGS DEALSOnline Calculator Estimates Income Tax Proposal’s Effect on Graduate Students
Prompted by concerns over the House version of the Republican tax plan, the Graduate Student Senate (GSS) has developed an online calculator that allows graduate students to assess how they might be affected by the legislation.
Under the House plan, graduate students will no longer be able to deduct the value of their tuition in exchange for working or conducting research, a change that could cost them hundreds or thousands of dollars.
Over Thanksgiving break, a GSS committee developed the calculator to help students estimate how much their taxes may increase based on the currently available information on the Republican plan. Students can enter their income, tuition, filing status and number of dependents into the calculator and receive an estimate of their potential tax liability. The calculator was reviewed by a tax expert, according to GSS.
“We believe that this is a useful tool that graduate students can use to get a rough estimate on how the tax increases and tuition provisions would impact them,” says a statement by the GSS executive committee.
Access the tax calculator here.
NPS: How To Open NPS Account Online To Get Extra Income Tax Deduction of Rs 50,000
An NPS account opened online requires a minimum amount of Rs 500
NPS or National Pension Scheme is a voluntary savings scheme for retirement and is regulated by the Pension Fund Regulatory and Development Authority or PFRDA. To popularise NPS, the government in Budget 2015-16 had introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. This extra deduction of Rs. 50,000 on NPS increases the total deduction allowed under Section 80C and 80CCD of Income Tax Act to Rs. 2 lakh. To make the NPS account opening process convenient, the National Pension System Trust has introduced a online facility called eNPS. (Read | NPS Statement And Account Balance: How To Check It Online)
The eNPS facility of National Pension System Trust allows opening of individual pension accounts under NPS and making initial and subsequent contribution to Tier I and Tier II accounts. However, to open an NPS individual account online you should have the following things.(Read | How Much Income Tax You Can Save By Putting Your Money In NPS)
-A mobile number, email id and an active bank account with internet banking facility
- Aadhaar number with a mobile number registered with it
-Scan copy of photograph, cancelled cheque and signature
- Minimum amount of Rs 500 in your bank account or credit card
Here is how to open National Pension Scheme (NPS) account online:
1)Go to eNPS website:- https://enps.nsdl.com/eNPS/NationalPensionSystem.html. On the right hand side of the home page click on "registration".
2)The online subscriber registration page will open. Select new registration, choose appropriate category, enter your Aadhaar number, and generate OTP. Enter the OTP you receive on your registered mobile number and click on continue.
3) After you click "continue" an acknowledgement number will be generated along with your name and a time stamp. Then select "OK".
4) You will be prompted to enter your personal details. Verify the details after you enter them, then click on "Save & Proceed".
5) In the next step you will be asked to enter your bank details in which you have online banking facility. Enter your bank details than click on "Save & Proceed" for the next step.
6) In the next step, you will be asked to decide the portfolio allocation among four available funds subject to a maximum exposure of 50 per cent to equity funds. Once you enter the allocation details, nominee details need to be updated.
7) Once you update your nominee details, you have to upload a cancelled cheque of your account, photograph and your specimen signature.
8) In the final stage, you have to make your first contribution towards NPS subject to a minimum investment of Rs 500. You can make the first payment either through your net banking or through credit card (with some additional charges).
9) On successful completion of payment, your permanent retirement account number (PRAN) will be generated along with the payment receipt.
10) Click on "Download Registration Form/E Sign" to complete the process of registration by submitting the OTP sent by UIDAI to the mobile number registered with your Aadhaar.
It will take two working days for the units to be credited against your PRAN number. Further, you will also receive an email on your registered email id regarding IPIN generation for your PRAN, which will be used to access your account online and make further investment in your NPS account.
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