Income Bonds

Definition / Meaning

An income bond is defined as a debt instrument whereby the issuer agrees to pay the principal but the coupon payments are subject to earnings. In other words, the issuer is liable to pay the coupon payments only when it has income in its financial statements. From an issuer point of you, such bonds are very beneficial. On the contrary, the investor will have to bear an additional uncertainty of generation of income by issuer.

Income Bonds vs. Preference Shares

Income bonds look very similar to preference shares. In preference shares, if dividend is not paid in a particular year due to insufficient income, the dividend for this year will be accumulated and paid in the subsequent year when there is a sufficient income.  This is not the case with income Bond and this is how they are different from each other. Although it is all about structuring an instrument because after all it is similar to an agreement between two parties and it can be structured as per the convenience of the two.

Benefits to Issuer

This type of Bond is very appropriate in the times of financial crisis or financial health of the company provided the investors are convinced to subscribe.  The direct benefit of this bond is that it can prevent a company from bankruptcy.

NSI Income Bonds

NSandI is a UK based saving organization working for getting cost effective funds to the government from the public. Income bonds are one of the many saving products of NSI that are offered to public.

NSI income bonds are accessible to a person aged 16 or more. The interest rate on the bonds is variable and can increase or decrease depending on the reference rate change by Bank of England base rate. The investment can range between 500 pounds to 1 million pounds. The best income bond funds offered by NSI can be accessed from following:


Last updated on : December 21st, 2017
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