Guaranteed advantages

CHASE DE VERE says escalator bonds are best for non- taxpayers. But guaranteed income bonds provide better returns for standard and higher-rate taxpayers because they pay income net of tax.

For example, the Halifax, one of the best escalator bonds, pays 7 per cent in year one, rising to 11.25 per cent in year five, an average of 8.65. But for standard rate payers it drops to 6.49 per cent.