How to make your money work for you

Are you trying to ensure that your money is being used in the most effective way possible? There are plenty of great savings options out there, but during difficult times, it’s essential to look for new ways to help your money grow.

It can be hard to choose with so many different ways to save. Often, the most effective investments require a minimum term, which means that you might lose access to your money precisely when you need it the most.

One way to make the most of your capital while benefiting from an investment is by opening an Income Bond.

Discover Income Bonds At Sheffield Mutual

An Income Bond is a way of investing your money while still receiving benefits from your capital.

Throughout this article, we will be helping you to understand if an Income Bond is the right choice for you by explaining:

• What is an Income Bond?

• How much can I save with an Income Bond?

• Can I access my money if it is invested?

• What if I die while my money is invested?

What Is An Income Bond?

An Income Bond is an investment made with a cash lump sum.

Our members can invest between £5,000 and £150,000 for a minimum of five years with no immediate tax implications.

But what makes an Income Bond special is that it allows investors to draw an income.

As long as you have invested more than £10,000, our members have the option to take an income, either monthly, quarterly, half-yearly or annually.

Our Income Bond also has a capital guarantee after 5 years. This means that if you leave your money invested for at least this length of time, you will be guaranteed to receive back at least as much as you have paid in, minus any withdrawals.

How Much Can I Earn With An Income Bond?

Because we are a friendly society, our Income Bonds allow you to take an income from your investment while earning bonuses, although bonuses are not guaranteed.

This can make it tricky to give exact numbers, but our online Income Bond calculator is the best tool to help you see how much your investment could earn.

Please note: The following example is for demonstration purposes only.

If one of our members invested £50,000, they could then take a maximum income of 5% per year, meaning a potential income of approx £208.

Bonuses would then be paid on the remaining balance, and, provided bonuses are still being paid, our members would earn bonuses based on this balance, plus any previously earned bonuses.

Taking a 5% bonus would mean you could take the income for 20 years, at the end of which your initial investment would be depleted. At the end of this period, you would have all your earned bonuses, which you could choose to reinvest or take out by closing the bond.

It is essential to understand that potential bonuses are NOT guaranteed. If you were to withdraw the maximum 5% for 20 years, your capital investment would be depleted, and only your bonuses would remain. 

As with any investment, there is an element of risk. During times of adverse market conditions, an MVR (Market Value Reduction) could be applied, which would reduce the value of any bonuses earned.

Before making any investment choices, please review our product information pack and key information document.

Are There Any Restrictions On How I Can Access My Money?

As with any form of investment, there are restrictions on how that money can be withdrawn.

An Income Bond has a capital guarantee after 5 years, so it’s recommended that you leave your money invested for at least that long. You can withdraw earlier, but there is a risk that you might get out less than you put in.

To take regular income, you must have a minimum of £10,000 invested.

If you wish to withdraw less than 2% of the overall value, you must have £30,000 invested. If you have less than £30,000 invested and want to withdraw cash, this must be above 2% of the initial investment.

It is also important to understand that income can only be taken from the initial capital that has been invested and cannot be drawn from any bonuses. 

What Happens If I Die While My Money Is Invested?

This is a widespread question when our members invest. Everyone wants to know that their investments will be used to support their families and loved ones if they pass.

If you pass away when there are joint names on your Income Bond, the other person invested in the bond becomes the sole policyholder.

If you are the sole investor for the bond, then we would pay 101% of the remaining capital investment to your estate or, if the value is greater, we would pay the entire value of the policy, meaning the value of the remaining capital plus any bonuses that have been earned.

If you were looking to leave a loved one a lump sum as a financial gift or to help pay for funeral expenses, consider Sheffield Mutual’s Whole of Life Plan, which could help provide your family with additional support after you pass away. 

Invest In An Income Bond With Sheffield Mutual

An Income Bond is a great way to maximise your savings. Apply for an Income Bond online, by post or over the phone on 01226 741 000.

Still have questions? Contact a helpful team member by calling the number above (Mon-Fri 9-5) or by emailing us at enquiries@sheffieldmutual.com.

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.