What Are Savings Certificates?

In short, Government issued fixed interest savings certificates provide the holder with a tax free sum of money at guaranteed rates. The beauty of them is that you are able to have these alongside any other tax free investments that you already have.



When considering taking out savings certificates you would have to decide how much you wanted to invest in them and what terms you wanted to take them out over. Usually you would have the option of taking out certificates over 2 or 5 years. You could also if you choose, invest in both terms.



Certificates are sold in issues. This means that when the fixed interest rate changes a new issue is presented. However this would not have an affect on any certificates that you already held, the rate that applied when you took out the certificates would still apply to your certificates and would be guaranteed. However if you chose to you could take out new savings certificates at the new rate of interest to make even more savings tax-free.



In order to be able to take out and benefit from tax free saving this way you would have to be over the age of 7 at the time of taking the certificate. You could also buy a certificate and be the trustee for anyone under the age of 7.



Usually there would be limits on the certificates as to how much you would be able to invest in them. This would be between £100 and could be up to a limit of £15,000. In order to be able to take full advantage of the savings you would have to leave the money in them untouched for the term you chose to take out the savings. However this does not mean that they are untouchable. If you chose to cash the policy in before maturity you would of course get a lower rate of return than if you leave them to run their course.



When the term of the savings certificates expire you will have several options to decide. You could cash the certificates in and benefit, choose to reinvest again in them or reinvest in a different product. You would have to contact the company before the term of the policy reached its end. If you did not then the company would reinvest the certificate over a term of the same length.



As with any financial product you choose to take out you would have to read the terms and conditions very carefully. Those offering the savings certificate should be able to provide you with all the information needed for you to decide if you wanted to invest in savings certificates.



oSavings certificates are one way of ensuring you would be guaranteed a lump sum at the end of the term of the certificates.



oIf the fixed rate of interest differs then the certificates you are currently holding would still be paid out at the rate of interest that applied when you took on your certificates.



oSavings certificates can usually be taken out for between £100 and £15,000 and anyone over the age of 7 can hold a certificate.



oYou can choose to cash in the certificate before the certificate reaches maturity but of course you would get a lower return than leaving the certificate to mature.

Posted in: Certificates, Online Accounting Certificate, Savings