The demise of the Elgar £20 note

A £20 note
Image caption The Elgar £20 note which is being withdrawn from circulation

Money does not grow on trees, but you might be surprised to discover that it can help trees grow.

That is because after banknotes are withdrawn from circulation and shredded into tiny pieces, they can be used in compost.

This is the fate for millions of £20 notes featuring the image of composer Edward Elgar which will no longer have legal tender status after 30 June.

After that date, shops will be less likely to accept these notes.

Banks, building societies and Post Offices will still accept them for a few months, but they are not legally obliged to exchange them for the replacement - a £20 note featuring economist Adam Smith.

Cash back

There are about 1.5 billion £20 notes in circulation, with a total value of £30bn, Bank of England figures show.

Of these, only 125 million (£2.5bn) are those with the image of Elgar.

The Elgar £20 banknote, first issued in June 1999, has gradually been replaced by the Adam Smith £20 note since March 2007.

On average, any £20 note is expected to have a lifespan of five years. By then, it is likely to be too soiled or damaged to be used in cash machines or accepted by banks or shops.

That means that lots of people will still have Elgar £20 notes in good condition - but they will need to make their mind up on what to do with them.

"We would encourage people to take their Elgar banknotes back to the bank now because it is business as usual," says Victoria Cleland, head of the notes division at the Bank of England.

"And they should check under their sofas for any stray notes because it is easier to spend or exchange them now."

Take note

If people have an Elgar £20 note in their wallet or purse, their options include:

  • Spending it now. Shops are less likely to accept this brand of £20 note after 30 June
  • Exchanging it. Banks, building societies and Post Offices will exchange the note for the newer Adam Smith version - but this will be at their discretion after 30 June
  • Sending it. The Bank of England will forever exchange an Elgar £20 note - but you will have to pay for the registered postage.

The Bank of England has the authority to withdraw notes from circulation under the Currency and Banknotes Act 1954.

It makes changes relatively regularly in order, partly, to keep ahead of counterfeiters.

The typical Bank of England banknote is durable paper made from cotton fibre and linen rag. It goes through a three stage printing process before being distributed.

On their return, high-speed note sorting machines separate the notes into those which are fit for re-issue, those which are too dirty or damaged for further circulation and any counterfeit notes which may have entered circulation.

These hi-tech machines will also pull out the Elgar notes and only Adam Smith notes will be re-issued.

Until 1990, withdrawn notes were incinerated, but now they are shredded before going into compost or taken to an industrial incinerator.

Collector's item

There is no formal penalty for any bank which continues to stack Elgar £20 notes in its cash machines.

However, it would damage their reputation with customers if they continued to put out the notes which were no longer legal tender, Mrs Cleland says.

Manufacturers of note-taking machines - such as ticket machines at railway stations - were informed of the changes some time ago.

But would it be worth keeping an Elgar £20 note as an investment and selling it later as a collector's item?

Not if the owner is hoping to sell it in their lifetime, according to specialist Barnaby Faull, of banknote dealer and auctioneer Spink.

He says that such notes would only be worth more than their face value if they were very unusual - such as having a low serial number or an error on the note.

However, he says that there is a very strong market in English banknotes, which are very popular among collectors.

"It has taken off in the last 30 years or so," he says.

A £1 note from 1914 - which would be exchanged for £1 at the Bank of England - recently sold at auction for £36,000. It had the serial number one.

Other English notes - always seen as good value, owing to a lack of hyper-inflation - can regularly fetch more than £20,000 at auction as long as they are unusual.

But supply of these collector's items is low, and the retention time needed quite long. This means that banknotes rarely attract attention from investors.

They have become collectables owing to nostalgia. It is also because of the size of banknotes - being more elaborate than stamps, and the value of notes holding back the numbers because people spend them rather than keep them.

Also popular among collectors are wartime notes, from a time when people were urged to dig for victory.

If they dig now, they might find that banknotes - mixed in the compost - are already part of the earth.

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