These give an absolute guarantee of a particular level of income or growth in return for investing in a minimum sum for a fixed period, and are suitable for very cautious investors. Rates change frequently and you should telephone us for up-to-date rates if you are thinking of investing. The return from these bonds is paid out net of basic rate tax, so they are not suitable for non-taxpayers. However, if you are a higher rate taxpayer there is no tax to pay (if withdrawals are less than 5% per annum) until the bond is redeemed. The redemption can be delayed until you cease to be a higher rate tax payer, meaning that there is no further tax to pay.

If you are a basic or higher rate taxpayer, before looking at current rates being offered by the numerous high street banks or building societies, it may be prudent to take a look at a Guaranteed Income or Growth Bond for a number of reasons:

High street banks usually quote gross rates in their advertising, whereas Guaranteed Bonds quote them net of savings rate tax, so always look for the equivalent gross rate to make a fair comparison, as often the rate is the same or better, especially on larger amounts.How do you gross up a guaranteed bond rate to compare it with a fixed rate from a building society?

For basic rate taxpayers, divide the net rate by 0.8. For example:

4% net divided by 0.8 = 5% gross

For higher rate taxpayers, multiply the net rate by 0.8, then divide it by 0.6. For example:

4% x 0.8 = 3.2 divided by 0.6 = 5.33% gross

Peace of mind. The level of protection offered to investors by the Financial Services Compensation Scheme for Guaranteed Income Bonds, follows different rules from deposits. For deposits, compensation is limited to 100% of the first £2,000, and 90% of the next £33,000 giving a £31,700 limit, whereas compensation for guaranteed income bonds is 100% of the first £2,000, and 90% of the remainder with no limit. For example, an investment of £100,000 would qualify for compensation of £90,200 as a guaranteed bond, but only £31,700 as a deposit.

As income from these bonds is already subject to tax, you only incur a potential income tax liability if you are a higher rate taxpayer and even then, these bonds offer a valuable tax deferral feature called `the extension option'. If you don't take income from the bond and at maturity the whole proceeds are reinvested into another bond with the same provider, any tax due can be deferred until the new bond matures. As this can continue over several reinvestments, it provides the option to cash in the bond when you are in a more convenient tax position.

We can enhance the rate payable on your investment by sacrificing some of our commission.

The best rates available are constantly changing so to find out what is on offer please call us on 0207 384 7300 or e-mail us.

Remember! All investments carry some risk. Before going any further, please read the Important Notice below.