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Popular bonds give good return on your savings.

Byline: Gary Hexley

WITH Christmas fast approaching, many people's thoughts may be focused on spending rather than saving money.

Compared to a couple of years ago, interest rates, and hence savings rates have dropped like a stone.

When interest rates come down, the first thing you see on the news is how much an average borrower will save a month on their mortgage payments.

What is ignored is the fact that the number of savers far outweighs the number of people with mortgages and falling interest rates means less return on their capital.

A good rate on an instant access telephone account will now only give you around 4.5 per cent net of basic rate tax, down from about six per cent a year ago. After inflation, which has remained fairly constant at around 2.5 per cent, this represents a fall in real interest of over 40 per cent.

More and more savers are looking to other areas to invest their money and if you can take a longer term view, then linking directly to equity markets through shares, unit trusts or investment trusts is sensible.

One of the most popular areas of investment in recent years has been the With Profits Bond, a low risk investment where most of the funds are held in equities.

The capital is not directly linked to the daily stock market value. Instead, a bonus is declared each year with a potential of a terminal bonus, depending on how the markets have performed.

Free details on one of the leading With Profits Bonds paying up to 10.25 per cent in the first year are available by ringing 0800 544644.

Gary Hexley is an independent financial adviser with Weston Financial Group Limited, who are regulated by the Personal Investment Authority.
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Publication:Sunday Mercury (Birmingham, England)
Date:Dec 12, 1999
Words:298
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