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Santander launches bond for impatient investors

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by Jan Harris
Santander launches bond for impatient investors

Santander has launched an innovative new product which allows customers to receive £1,000 interest almost immediately, on an investment of £12,000.

The Upfront Interest Bond has a minimum three-year term and a minimum initial deposit of £10,000 is required.

It is only available to Santander current account customers and interest on the bond will be paid into the account within six weeks of the date the bond was opened.

It offers an interest rate of 3.36 per cent gross AER and although the offer of three years’ worth of interest up front is tempting, savers who are willing to wait for their interest could find a higher rate of elsewhere.

No withdrawals can be made during the life of the bond, so once the interest has paid, the money is tied-up for the three-year term.

Earlier this month Santander launched its inflation-linked Issue 7 Bond, with a minimum deposit of £500 and a maximum of £2 million.

The bond is linked to the retail price index (RPI), so that any increase in RPI inflation will trigger an equivalent increase in returns for the bond, preventing the investment being eroded by inflation.

If the RPI increases by 20 per cent over the six-year term of the bond, the investor would receive 20 per cent on top of their initial investment.

However, if the RPI falls the bond doesn’t look quite as attractive as it offers a minimum interest rate of 10 per cent before tax, which would mean the investor would receive just £1,000 interest on an initial deposit of £10,000, equating to 1.6 per cent a year.

The six-year term of the bond could also be off-putting for some investors, as no withdrawals are allowed during this period.

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News posted: November 23, 2011

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