Guaranteed Savings Bond (Issue 29)
How your interest is calculated
For the Guaranteed Savings Bond (Issue 29) the interest that is paid on your capital is linked to the performance of the FTSE 100 Index and is measured as follows:
Step 1. We record the start level of the Index at close of business 22nd August 2008.
Step 2. We take the value of the Index at close of business on each business day between 22nd August 2012 and 22nd August 2013.
Step 3. We then calculate the average of the Index over that period† (this is the average year 5 level).
Step 4.We deduct the start level of the Index from the average year 5 level† (calculated in step 3), and divide this figure by the start level of the Index. We then multiply this by 100 to give the percentage change over the five-year period.
Step 5.We multiply the average percentage change by 90% to determine the gross interest payable on the Bond at the end of the five year period.
†Final Year Averaging
In order to iron out any last minute fluctuations in the market, Index levels are averaged over the final year of the term (explained in step 3). This means that even if there were a stock market crash just before maturity in 2013, the interest paid is unlikely to be significantly affected. This will also have the effect of averaging out any rises in the final year and, in this instance, is likely to reduce the overall interest.
For the full term of your investment your money is held in a Co-operative Bank account and not directly invested in the stock market. This means you will not receive any individual dividend income. The most you would lose is the interest you could have earned by putting your money into an ordinary deposit account.
The table below shows examples of how much your potential interest would be for several different levels of increase or decrease over the 5-year period on an investment of £10,000. Examples given are for illustrative purposes only.
| Original investment | Average increase in interest | Gross interest as 90% of any average rise in the index** | Net interest** | Total GSB return*** |
|---|---|---|---|---|
| £10,000 | 75% | 67.5% | 54% | £15,400 |
| £10,000 | 50% | 45% | 36% | £13,600 |
| £10,000 | 25% | 22.5% | 18% | £11,800 |
| £10,000 | 0% | 0% | 0% | £10,000 |
| £10,000 | -25% | 0% | 0% | £10,000 |
** Gross interest available to eligible customers who complete appropriate HM Revenue & Customs Certificate.
For other cases, we will pay interest net of lower rate tax (currently 20%).
*** Shown here as Original Investment + Net Interest
Gross is the contractual rate of interest payable before the deduction of income tax at the rate specified by law.
Please note: If the percentage change of the FTSE 100 index is zero or negative, no additional interest will be payable, but the capital invested will be repaid in full. You will lose what you could have earned in an ordinary deposit account. No interest will be paid during the life of the Bond.
