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www.InvestmentGuide.co.uk List of fixed interest stocks
Other types of Stock
STOCK
(Also called Gilts, British Government Stock, British Funds)
Lump sum invested in a stock issued by the Government at a fixed interest rate. The stock usually has a fixed life which ends on the redemption date when the nominal value of 100 is repaid in full; it can be bought and sold at any other time at the market price. The yearly return you get, called the net redemption yield, is the after tax interest you receive plus the averaged out gain (or loss) you expect. Most stocks will show no gain to redemption as they currently stand above the nominal value of 100. Indeed you are often guaranteed a hefty loss. If interest rates rise - or are expected to rise - the value of these stocks may fall. If the reverse happens, that is interest rates fall - or are expected to fall - the value of these stocks may rise. Divide your money between stocks maturing say, every two years.
Who can invest Anyone.
How worthwhile Different stocks are good for different rate taxpayers. Often better value for non-taxpayers and higher rate taxpayers. 20% taxpayers compare with Bank or Building Society Fixed Term Account. Stocks maturing in over 10 years or undated (e.g. War Loan) are not recommended. If you want to invest for longer or if you are a higher rate taxpayer, consider Stock Government Index Linked.
Minimum None for a sale through the Bank of England but there is a minimum charge of £12.50. Around £5,000 through a stockbroker because of minimum commission.
Maximum None. But each purchase bought through the Bank of England must not exceed £25,000 in any one stock on any one day. No maximum on sales.
Suitable Lump sums.
Money back At the redemption date. Or 2 working days if you sell before then; you get the market price at the time you sell (which may be more or less than you paid). You normally have to sell using the same type of intermediary, e.g stockbroker or National Savings (now handled by the Bank of England), as you bought with. For the Bank of England you need a separate form for each stock you sell.
Interest Fixed. When you buy a stock (or if you sell before it matures) your contract note, giving details of the transaction, shows accrued interest as an addition or deduction from what you pay or receive. Whether it is an addition or deduction depends on when you buy or sell in relation to the next or last interest payment date and whether the stock is ex-dividend or not. There are special rules for taxing this, see Tax below.
Interest paid Usually half-yearly by cheque to you; or direct to a bank or building soclety account.
Tax Interest is liable to income tax. Since 6 April 1998, no tax has been deducted on interest on new holdings of stock purchased after that date; taxpayers should declare the interest on a tax return and will pay later. You can, however, opt to have 20% tax deducted from the interest. Before 6 April 1998 stocks bought through a stockbroker or direct from the Bank of England as a new issue, had 20% tax deducted; if you have tax deducted, you can opt to receive the interest without deduction of tax if you complete a form and return it to the Bank of England. Non-taxpayers can reclaim the tax from the Inland Revenue. Higher rate taxpayers have to pay extra; basic taxpayers don't. War Loan does not have tax deducted.
Any accrued interest added to your contract note (see Interest above) is liable to income tax. If accrued interest is deducted from your contract note total, you can deduct it from other interest from the stock or claim a tax rebate if applicable. Accrued interest rules don't apply if the nominal value of all your stocks is £5,000 or less. For more details from the taxman, see Accrued Income Scheme. Gains on stock are exempt from capital gains tax.
Fees to pay If bought through the Bank of England: Commission is 0.7% on the first £5,000 and 0.375% on the rest; minimum £12.50 for purchases; no minimum for sales. If bought through a stockbroker: Varies e.g., ½% (min. £18.50, max. £150) to around 1½% on first £7,000 (min. £10 to £30). Same when you sell. None if you buy a new issue direct or hold to redemption.
Passbook None. Stock certificate or statement of ownership from your stockbroker if your stock is held by your stockbroker as nominee or more preferably in your own name as an individual member of Crest if your stockbroker offers this service.
Children Stock can be bought in a child's name only through the Bank of England. Otherwise stock for the under 18's must be held in an adult's name.
Risk None if you hold until redemption although if you buy at a price of more than 100, you will only receive 100 at redemption. Possible capital loss if you want your money back early.
How to invest Phone a stockbroker. Ask which stock has the best net redemption yield for your tax rate and the period over which you want to invest. Prices and before tax yields are published in the Financial Times under UK Gilt Prices in the Companies and Markets Section, and in other daily newspapers on the Share Price Page every day. Click here for a list of stocks with redemption months.
Where from A stockbroker by phone or on-line. Compare commission. With a stockbroker you can put a limit on your sale or purchase price and usually you can trade by phone and know the price you are dealing at; you can't with the Bank of England.
List of fixed interest stocks
Other types of bond or stock
Last updated 17
December 2007.