6 things you need to know about the Pensioner Bond - Savings - News - Moneyfacts


6 things you need to know about the Pensioner Bond

6 things you need to know about the Pensioner Bond

Category: Savings

Updated: 26/03/2014
First Published: 26/03/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

One of the rabbits out of George Osborne's hat in last week's Budget was easily the Pensioner Bond, set to be offered through NS&I, a savings product that could see those aged 65+ generating much better returns for their money.

Considering that a lot of pensioners rely on their savings to provide a meaningful income it's certainly a decision to be applauded. But, just what is the Pensioner Bond and how will it work?

We've compiled a few things you need to know about it so you're ready for its launch.

  1. To be eligible, you'll need to be aged 65 and above. As the name suggests it's a pensioner bond – for pensioners only – so those of you still of working age will have to look elsewhere.
  2. There'll be two versions to choose from, a one-year and a three-year. They'll have different rates accordingly, so as with any fixed rate bond the decision will come down to how long you're willing to lock your money away for. They're fixed rates too, giving you security over the returns you'll get.
  3. Both will offer market-leading rates. As yet there's no confirmation of what those rates will be – they'll be set in the autumn – but current estimates are that the one-year bond will pay around 2.8% and the three-year will offer 4%.
  4. The maximum investment is £10,000 per person, per bond. But, you'll need to be quick off the mark – there isn't a limitless supply of these bonds, and NS&I is only planning to issue £10bn worth of them.
  5. The returns will be taxed just like any other savings account. Unlike ISAs they're not tax-free, so they'll still be subject to income tax in accordance with your nominal tax rate.
  6. They'll be available from January next year. You've got a while to wait until the bonds become available, and that means you should be cautious about where you invest your money between now and then. If a current bond is coming up to maturity, don't automatically roll it over into a new fix – given that only a limited number of these bonds will be available it makes sense to keep your cash to hand (potentially in easy access accounts) so you can invest it as soon as they're launched, particularly as they'll offer much better rates.

It's a great boost for pensioners who have been stuck with paltry interest rates over the last few years, and considering the rates are set to beat alternatives on the market it means pensioners can generate a meaningful return once again. It's even hoped that the new bonds will mean other banks and building societies want to up their game as they see savers take their money and head for NS&I, so it could be good for the savings market as a whole.

What Next?

Check out the best easy access accounts that can offer a part-time home for your money, and then all you've got to do is wait for January!

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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