Early withdrawal of childrens bonds

A question about : Early withdrawal of childrens bonds

16 months ago I placed with Natwest a childrens bond for each of my sons at a value of Ј1000 fixed at 3.75% for 5 years(it seemed a reasonable rate at the time) but now the rates are rising would I be advised to close early, pay any penalty and place the funds elsewhere - and if yes where's the best place to put the boys money

Thanx

Best answers:

• Well the bonds as they are have just over 3.5 years left to run. Ј1000 at 3.75% would earn you Ј37.50 a year, which would be Ј131.25 in the next 3.5 years. An Abbey 4 year childrens bond pays 5.50%, which would be Ј55 a year or Ј192.50 over the next 3.5 years. Over the reamining period of your bond, Abbey would pay Ј61.25 more. So if Natwest would charge you less than Ј61.25 to close the bond now you'd be better off switching.
  I should note that I am an Abbey employee so I'm mentioning a product that I'm familiar with, not necessarily the best available.
• No I was just doing simple calculations as it's late Interest is paid back into the bond annually, so future interest would be accumalated based on the principal and accumulated interest. I assume interest on the Natwest bond mentioned would be paid in the same way, so you would actually make more than the Ј61.25 I mentioned by switching to the Abbey product.
  Again, I don't claim to have knowledge of the full marketplace so other companies may well have better products, but just giving a rough example.