Consol (bond) facts for kids
Consols were a special type of loan that governments, like the UK and US, used to borrow money. Think of them like a promise from the government to pay you interest forever, without ever having to pay back the original loan amount. That's why they were called "perpetual bonds." However, the government could choose to pay back the loan (redeem it) if they wanted to.
The first British Consols were created in 1751. The United States government also issued Consols from 1877 to 1930. Today, all of these old Consols have been fully paid back.
How Consols Began
In 1752, a British politician named Sir Henry Pelham, who was in charge of the country's money, decided to make things simpler. He combined many different government loans into one big loan called "Consolidated 3.5% Annuities." This helped the government pay less interest on its debts.
A few years later, in 1757, the interest rate on this big loan was lowered to 3%. It stayed at 3% for a very long time, until 1888.
Changes Over Time
In 1888, another politician named George Joachim Goschen made more changes. He combined the 3% Consols with other similar loans into a new one called "23⁄4% consolidated stock." This was part of a law called the National Debt (Conversion) Act 1888.
Under this new law, the interest rate was set to drop even further to 21⁄2% in 1903. The government also set a date, April 5, 1923, after which they could choose to pay back the loan at its original value.
In 1927, Winston Churchill, who was then in charge of the country's money, issued new "4% Consols." This was done to help pay off some of the War Bonds that had been issued during World War I.
When Consols Ended
For many years, Consols were a part of the UK's financial system. But on October 31, 2014, the UK government announced that it would finally pay back all the remaining 4% Consols in early 2015. This happened on February 1, 2015.
After that, the government also paid back the 31⁄2% and 3% bonds between March and May of that year. The very last Consols, the 23⁄4% and 21⁄2% bonds, were paid back on July 5, 2015. A law called the Finance Act 2015 made sure that Consols officially came to an end.
See also
- War bond#United Kingdom
