First Option offers new rate on maturity

SAVERS who put money into the first issue of National Savings First Option Bonds are expected to be offered a new one-year fixed rate of 4.75 per cent, net of basic-rate tax, when their bonds mature. This is the same rate as that offered to new buyers of current issue First Option Bonds.

National Savings is committed to writing to First Option Bond holders on the first anniversary of purchase. The bonds went on sale on 7 July 1992 and letters are to start going out this week.

Holders can cash in their bonds, filling out forms supplied when the bonds were issued. Alternatively, they can leave their money in the bonds to earn the new fixed rate.

National Savings will move the rates on bonds from time to time, but once a rate has been guaranteed to a saver, it will be fixed for the next year.

No interest is payable on bonds cashed in before their first anniversary. Bonds held after this but cashed in before their next anniversary receive half the interest credited from the last anniversary to the date of encashment.

The first issue of bonds guaranteed a gross rate of 10.34 per cent over 12 months or 7.75 per cent after basic-rate tax.

People who invested a lump sum of pounds 20,000 or more are entitled to a bonus of 0.4 per cent gross (0.3 per cent net) on the first anniversary.

The First Option Bond was one of National Savings' most successful products, taking pounds 16m in its first week. The Government was forced to cut the rate, and later withdrew the bond temporarily, because it was draining building societies and threatening mortgage rates.