How to Invest in British Bonds

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A government bond is basically a certified note stating that a person has lent the government money and will earn interest until the note is cashed back in. In the United Kingdom, all British bonds are handled by National Savings and Investments (NS&I) and are backed by the British Government. This kind of investment is considered low risk and, therefore, also considered a low yielding investment. There many types of British bonds which can be bought several different ways.

  • Know about Income Bonds. There are two types of Income Bonds. Guaranteed Income Bonds are fixed rate bonds where the bondholder receives the interest earned each month as income for a fixed period of time of one, three or five years. Regular Income Bonds are competitive variable rate bonds where the bondholder receives the interest earned each month as income and can cash them in at anytime with no notice or penalty.

  • Know about Guaranteed Growth Bonds. Guaranteed Growth Bonds are fixed rate bonds with different rates depending on the bond terms of one, three or five years. The longer the term, the higher the interest rate.

  • Know about Children's Bonus Bonds. Children's Bonus Bonds are fixed rate bonds that parents can get in their child's name and are completely tax-free, even when cashed in. These bonds are issued only for a 5-year term.

  • Know about Guaranteed Equity Bonds. Guaranteed Equity Bonds are investments in which bondholders have the potential to earn high interest rates by linking its earning potential with FTSE 100. However, if the FTSE 100 shares drop, bondholders are still guaranteed at least the original investment after the bond term is up.

  • Know about Premium Bonds. Premium Bonds are bonds where the bondholder does not earn any interest, rather the interest is put into a "pot" and the NS&I holds a drawing each month where bondholders can win tax free prizes of up to £1 million.

  • Visit the National Savings and Investments website to apply online. Once there, you can read more about each type of bond and decide which bond is best for you and your needs. Once you select the type of bond you want, click the "invest now" button. From there you will need to agree to the terms and conditions, pay by debit card only, give banking details, and a valid email address. If this is a first time investment, NS&I will send you a form in which you will need to sign within 30 days. If not, you will need to enter your customer numbers. Bonds will be sent to the address on file. You cannot apply for a children's bond or a bond in a child's name online.

  • Call the toll free number. You can purchase British bonds by calling 011 (+44) 500 500 000 everyday from 7 a.m. to midnight. For Premium bonds only, call 011 (+44) 500 007 007. Before calling, you will need to have your debit car; your bank or building society sort code and your account or roll number; and your customer number if you have previously invested with NS&I. The customer service representative will walk you through the application process and answer any questions you may have. You cannot apply for a children's bond or a bond in a child's name by phone.

  • Apply by post. You can send in your application with a cheque by picking up a brochure, which has the application on it, at your local U.K. post office or call 011 (+44) 845 964 5000 (rates vary) for an application to be mailed to you. Some of the applications are also available on the NS&I website for download. Post the completed application and cheque to the address on the application. There are different addresses for the different bonds. (See Resources for contact information.)

  • Apply at the post office. You can also go directly to your local post office in the U.K. to purchase your bonds at the counter. You will need to bring all bank information, customer number if you have one and a cheque.

Tips & Warnings

  • The phone numbers listed here assume that you are calling from the U.S. or Canada. If you are calling from within the U.K., please replace "011 (+44)" with "0." If you are calling from elsewhere internationally, replace "011 (+44)" with "00 (+44)."

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