The Grandfathered bonds.

The Grandfathered bonds.

According to the Savings Directive, "Certain negotiable debt securities are not treated as money debts if they meet certain conditions for the duration of a transitional period which ends on 31 December 2010. These securities ("grandfathered bonds") do not then count as money debts for all purposes of the regulations up to 31 December 2010: interest, premiums and discounts derived from these bonds are not savings income; and investment in these bonds does not count when deciding whether the thresholds which determine whether income from certain collective investment funds is savings income have been passed.

A security will be a grandfathered bond if:

• it was first issued before 1 March 2001 or the prospectus was first approved by the appropriate regulatory authority before that date, and

• no further issue was made on or after 1 March 2002.

If the bond is a government bond (or issued by a related public authority or an international organisation – see the Schedule to the regulations) and a further issue is made on or after 1 March 2002, the whole of the issue (whether made before, on or after 1 March 2002) is not a grandfathered bond. The whole issue of the bond is a money debt. If the bond is issued by another type of issuer (e.g. a commercial company) and a further issue is made on or after 1 March 2002, only the part of the issue made on or after 1 March 2002 is not a grandfathered bond. This part of the bond issue is treated as a money debt; the rest of the issue (made before 1 March 2002) is not a money debt."

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