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www.InvestmentGuide.co.uk LOCAL AUTHORITY
(Also called Local Authority Bond)
Lump sum invested for a fixed term of 1 to 6 years at a fixed interest rate. Some local authorities offer short-term loans for from 7 to 364 days but usually for amounts over £100,000. No additions or withdrawals allowed.
There are also Negotiable Yearling Bonds. These are issued by a number of local authorities every Tuesday for 1 year, 2 years or longer periods. The interest rate for all bonds issued on the same day is the same (e.g. 1 year 4%, 2 years 4¼%) and is fixed for the term of the bond. Bonds can also be bought and sold on the stock market. If you buy for less than the redemption value, you can make a capital gain which is exempt from capital gains tax; if you make a loss you can't get allowable loss relief.
Who can invest Anyone 18 or over.
How worthwhile Poor value currently. Terms over 5 years not recommended.
Minimum £1,000.
Maximum Varies.
Suitable Lump sums.
Money back At end of term.
Interest Fixed. Rates vary between different local authorities and depend on the length of term and minimum allowed.
Interest paid Usually half-yearly.
Tax20% tax is deducted from the interest. Non-taxpayers can reclaim the tax from the Inland Revenue (or have interest paid with no deduction). Higher rate taxpayers pay extra; basic taxpayers don't.
Fees to pay None.
Passbook None. Certficate issued.
Children The investment must be held in an adult's name.
How to invest Subscribe to Money£acts which includes a table of rates updated each month. Phone the treasurer of the local authority you choose; check the rate and ask for an application form; or agree terms by phone and send a cheque with a letter confirming the details.
Where from Local authorities.
Last updated 26
March 2011.