Saturday 14 May 2011

Portfolio Buy: BM Savings 5-year 5.05% Fixed-Rate Bond

As part of the management of my fixed-rate savings I have some cash to re-invest, as one of my 'easy access' account deals came to an end and has accumulated a fair amount of cash that no longer needs to be 'easy assess'.

So, I am going to move this cash up to Level 3 of the DIY Income Investor Income Pyramid (i.e. from Level 2 'easy access') - managing a chunk of cash that is not needed for day-to-day use or as an Emergency Fund. Inevitably, it is necessary to 'roll over' these cash accounts as they come to the end of their term.

I discussed in a previous post some of the issues and options, including:
  • inflation-linked bonds offered by NS&I and other banks
  • the outlook for inflation
  • the downturn in money market 'swap rates'

Also tax is a key issue - as you want to maximise your after-tax income. In our case, we don't pay any tax on the income from our cash savings accounts, but for those that do the NS&I inflation-linked account looks attractive, as it is tax-free.

Personally, I can't get a good grip on future inflation rates - and I don't believe that NS&I would offer the deal if the Treasury didn't think it was better for them than us.

So the account we decided on was the BM Savings 5-year 5.05% bond, which can be opened online and pays interest annually. As we already have an account with BM Savings, it was easy enough to open the account and transfer in the cash.

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. I can see the benefits and advantages of a Fixed Rate BM Savings. For one, we can draw up a monthly plan for the fixed rate. loan modification attorney

  2. I think the biggest advantage is not having to feel responsible for someone else's financial decisions the way you might if you were a financial advisor and encouraging someone to make a particular choice.