How much you get
Like a bank, we invest the money raised through the bonds to make a profit – except we do it so we can give the profit away.
When someone puts their money into a bond to support you, the amount you get will depend on the size of that profit and the size of the share the investor wants to keep.
The loan rate
To generate the profit, we lend the money at a fixed rate of interest for five years to a secure AA rated social business. The higher that rate is, the more profit we make.
Because we know exactly what return we’ll get on this investment, we can take out the profit up front. For example, if the interest rate is 4%, then we can lend £822 today to get a repayment of £1,000 in five years’ time.
(For the mathematically minded: 1,000 / 1.045 = 822)
The rate of return
When we make a profit on the investors’ money, we let them choose how much of it they want to give away and how much they want to keep for themselves.
So, based on the rates above, if someone invests £1,000 and chooses to give away all the profit to you, we’ll lend £822 of their investment so that we can repay their £1,000 in five years’ time.
After taking out our costs, that leaves £153 of profit which we give up front to you.
Alternatively, if they choose the maximum 10% return on their investment, we would lend £904 of their investment to pay them back £1,100. That leaves £71 after costs for you.
To find out how much you would get based on rates in this current round, see our current rates.
What’s new
Press release
18th April 2012Ethical savings bond pays up to 14% upfront interest to charity more ›
