Abbey’s latest guaranteed income savings bond is offering investors 5.25 per cent gross interest – equivalent to 4.2 per cent net.

The savings bond offers guaranteed fixed-income returns and the full return of capital as long as the bond is held for the full four-year term of the investment.

But stiff penalties mean investors who withdraw their money early may get back less than they paid in.

If taken annually the new Abbey savings bond guarantees a fixed income of 4.2 per cent a year net (5.25 per cent per annum gross equivalent) if interest is taken annually, or 4.12 per cent a year net (5.15 per cent gross equivalent) if taken monthly or quarterly.

It is a limited offer and investors must apply by August 8th 2006, or earlier if sold out.

The savings bond pays income net of basic-rate income tax, which is not reclaimable by non-taxpayers and starting rate taxpayers. The gross equivalent rate is provided for illustrative purposes only and is not paid by the guaranteed income bond.