National Savings and Investments (NS&I) Children’s Bonds used to allow you to invest a lump sum on behalf of a child under 16. But these saving bonds are no longer available. Find out how Children’s Bonds worked, what to do if you have one maturing soon and what the alternatives are.
How did Children’s Bonds work?
- There was no tax to pay on the interest.
- These were five-year bonds giving a fixed interest payment every year. (Children’s Bonds were previously known as Children’s Bonus Bonds, which had an annual fixed rate of interest plus a fixed and guaranteed bonus payment if you held the bond for the full five years. The name changed when the bonus payment was removed).
- Interest payments were fixed. So when you bought the bonds, you’d know in advance exactly how much they would grow during the term.
- Only parents, guardians, grandparents and great grandparents could buy these bonds for anyone under 16. A parent or guardian had control until the child turned 16 (or the first five-year anniversary after the child’s 16th birthday).
- You could invest between £25 and £3,000 per bond issue in £25 units, per child.
- When the five-year term was up, you could either cash in or reinvest the bonds for another five years at a new interest rate. You could keep reinvesting until the child turns 16. The bonds finally mature when they reach the first five-year anniversary on or after the child’s 16th birthday. After that, the bonds stop earning interest.
- The penalty for cashing in early is equivalent to 90 days’ interest on the amount cashed in.
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What are my options if I have a bond which is due to mature soon?
Need to know
Withdrawing money from a bond at a time other than at renewal or maturity means you’ll get charged a penalty equivalent to 90 days’ interest.
The person who looks after the bond can still renew existing bonds until the child reaches the age of 16. You have three options for your existing bonds when they mature:
- renew the bond, reinvesting the value of the bond plus the interest
- cash in part of the bond, leaving a part of it to be reinvested
- cash in all the bond.
Bonds are renewed and reinvested automatically unless you tell NS&I otherwise.
This means you need to decide if you want to cash in all or part of the bond before the maturity date of the bond. NS&I will write to you around 30 days before your bond matures to explain your options in detail. You don’t need to do anything until you receive your pack.
Once the bond has been renewed there’s a penalty for withdrawing that’s currently the equivalent of 90 days’ interest.
If you decide to renew, be aware that the interest rate could be higher or lower than the interest rate on your existing bond.
