Last April 8, Cassa Depositi e Prestiti issued new postal savings bonds. These are those with an 8-year coupon, a type of bond that stands out from the others because the interest payment occurs every 6 months through, as can be understood from the name, periodic coupons. The functioning is therefore similar to that of government bonds – even if the returns are often lower. Let’s see what interest rate they offer.
The characteristics of the 8-year coupon BFP
Postal vouchers with an 8-year coupon are products available only in digital version. It means that there is no paper document but only an electronic record. They last 8 years and provide fixed interest which is paid every 6 months through coupons credited to the savings book or postal current account with the same name.
These securities are issued daily by the Cassa Depositi e Prestiti based on subscription requests and can only be registered in the name of adults (up to a maximum of 4 provided they have the same passbook or linked account).
The price, then, is equal to 100% of the invested value, so they are purchased at par, and the minimum amount is 1,000 euros with the possibility of adding sums in multiples of 50 euros. The maximum limit that can be subscribed by a single person, however, is 1 million euros in a single day, even if the operation is carried out in multiple post offices or online.
How interest works over the years
Postal savings bonds with an 8-year coupon provide for the payment of fixed interest every 6 months until the end of the 8 years. Returns are calculated on an annual basis and then divided into 2 equal parts for the semi-annual payment. The value of each individual coupon depends on the amount invested and the expected return.
From the conditions in force since 8 April it can be seen that:
- after the 1st year the coupon rate is 1% and the actual gross annual yield is 1%;
- after the 2nd year the coupon rate is 1.25% and the actual gross annual yield is 1.13%;
- after the 3rd year the coupon rate is 1.50% and the actual gross annual yield is 1.25%;
- after the 4th year the coupon rate is 1.75% and the actual gross annual yield is 1.37%;
- after the 5th year the coupon rate is 2% and the actual gross annual yield is 1.50%;
- after the 6th year the coupon rate is 2.25% and the actual gross annual yield is 1.62%;
- after the 7th year the coupon rate is 2.50% and the actual gross annual yield is 1.74%;
- after the 8th year the coupon rate is 1.75% and the actual gross annual yield is 2%.
What is the difference between the two interest rates
The gross annual coupon rate is the base value on which the interest received during the year is calculated. The actual gross annual return at the end of each holding period, however, is the real return of the security if it is held up to that moment.
In the first year the two values are identical since the accumulation of interest has not yet occurred. Starting from the second year, however, the actual return differs because it is calculated taking into account the interest already accrued (capitalisation).
Performance example
Let’s see an example of return made using the calculator made available by Poste Italiane:
Assuming you want to invest 3,000 euros in the 8-year coupon bond, the calculator made available by Poste Italiane shows that the net redemption value at maturity will be 3,000 euros while the total net coupons paid up to maturity will be 426.56 euros. However, this calculation does not include stamp duty which must be calculated according to current legislation.
How the Bfp coupon redemption works
If the postal voucher is only partially repaid before maturity, the interest is recalculated on the residual capital. However, if the total refund is requested before 6 months have passed from subscription, no interest will be paid.
Likewise, if the security is closed before the due date of a coupon, that coupon is not paid.
At the end of eight years, the BFP no longer produces interest and becomes interest-free from the following day.
How to subscribe for 8-year coupon bonds
The postal voucher with an 8-year coupon can be subscribed and reimbursed in post offices by bringing with you the tax code and identity card or another valid identification document.
To avoid long queues you can book an appointment at the counter:
- on the company’s official website;
- from the Poste Italiane application.
It can also be subscribed to from the web or app. In this case, however, you must be the owner of a Smart postal savings account or a BancoPosta current account enabled for online device services.
The settlement account
If you subscribe to dematerialized vouchers such as the 8-year coupon one, it is necessary to have a settlement account which can be a postal savings book or a BancoPosta current account.
The voucher must then have the same name as that account since in the event of early or expiry repayment, the accrued amount will be credited automatically to it. This account cannot therefore be extinguished in the presence of existing vouchers.
The prescription
All postal bonds, including the 8-year coupon, no longer produce interest from the day after expiry. For this type of security, the accrued amount is then transferred to the settlement account.
If you have paper vouchers, however, you must pay attention to the statute of limitations which occurs 10 years after the expiry of the title. If this is done, the right to collect both the invested capital and the accrued interest is lost as the accrued amount is prescribed in favor of the fund established at the Ministry of Economy and Finance.
To check the expiry of your securities you can go to the post office or you can carry out this operation online only if you are the holder of a single-headed or joint-headed Smart booklet with separate or ordinary signature.
Taxation
If the total value of the postal savings bonds does not exceed 5,000 euros, stamp duty is not paid. If it exceeds it, however, it is 0.20%. All BFPs are then subject to a 12.50% tax on interest and are exempt from inheritance tax.
