Term Accounts

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Term Accounts

These accounts are where you invest for a set period, 1/2 two years, say. Either you cannot get your money back earlier or withdrawals are subject to strict rules, e.g., you must leave a certain sum invested, or make only one withdrawal of up to ten per cent of the value of the account, and so on. There are many variations: with some, the return is paid at the end of the term when the account or bond matures; with others, you can take a monthly income.

The minimum investment varies and could be from £2,500, to £10,000. Interest is taxable and usually paid with tax at the savings rate (20% in 2000-1) already deducted. Non­ taxpayers can reclaim tax overpaid, or, better still, arrange for interest to be paid gross by completing Form R85 from the bank, building society or your local tax office. Starting-rate taxpayers can reclaim part of the tax. No further tax for basic-rate taxpayers, but higher-rate taxpayers have extra to pay.

Capital is not at risk but is vulnerable to inflation. Variable rates are vulnerable to falling interest rates, but you would lose out if locked into fixed rates when other interest rates were rising. Risk rating: three

These accounts are where you invest for a set period, 1/2 two years, say. Either you cannot get your money back earlier or withdrawals are subject to strict rules, e.g., you must leave a certain sum invested, or make only one withdrawal of up to ten per cent of the value of the account, and so on. There are many variations: with some, the return is paid at the end of the term when the account or bond matures; with others, you can take a monthly income.

The minimum investment varies and could be from £2,500, to £10,000. Interest is taxable and usually paid with tax at the savings rate (20% in 2000-1) already deducted. Non­ taxpayers can reclaim tax overpaid, or, better still, arrange for interest to be paid gross by completing Form R85 from the bank, building society or your local tax office. Starting-rate taxpayers can reclaim part of the tax. No further tax for basic-rate taxpayers, but higher-rate taxpayers have extra to pay.

Capital is not at risk but is vulnerable to inflation. Variable rates are vulnerable to falling interest rates, but you would lose out if locked into fixed rates when other interest rates were rising. Risk rating: three

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