The Pensioner Bond will be at the forefront of a lot of retirees' minds at the moment, many of whom are hungry to make a decent return on their savings. Fresh announcements last week have seen it leap back into the headlines, but just what is this bond everyone's talking about, and ultimately, can you benefit from it?
The Pensioner Bond is a Government-backed savings vehicle set to be launched by National Savings & Investments (NS&I). There are two versions of it, a one-year bond and a three-year version, and pensioners will be able to save up to £10,000 in each account. They'll be launched in January and, although no exact details have been released regarding rates, they're expected to offer in the region of 2.8% for the one-year account and 4% for the three-year version – meaning they could easily offer rates that are double those available on the high street.
Quite simply, it's the offer of higher-than-average rates that's got everyone talking, with the bonds being specifically designed to help pensioners secure a decent return. The savings market (or lack of) over the last few years has had a significant impact on the income of pensioners, many of whom used the interest earned from their lifelong savings as a key income boost. The significant drop in rates since the financial crisis has seen this income stream all but dry up, which is why the Chancellor promised, in his 2014 Budget, to offer these kinds of returns.
There's been much speculation about the possible terms of the Pensioner Bond since it was announced in March, and last week the Government revealed a few more details. However, not everyone was pleased with them. The key announcement was that the bonds wouldn't pay interest monthly, dashing the hopes of those who were looking to supplement their regular income, and will instead pay out on maturity. They'll also deduct 20% income tax before any interest is paid, so those who are non-taxpayers will need to claim the money back afterwards– and they can't fill in form R85 to prevent tax from being deducted.
Despite the slight setback posed by these new developments, the bonds are still expected to be hugely popular. It's thought that pensioners are holding back billions of pounds in savings ready to pour into them, with many currently opting for easy access accounts rather than fixed rate versions.
And there's every possibility that you'll be able to benefit. The rates on offer will be far higher than any you could find from a traditional savings account, and although you won't be able to use your savings as a form of regular income, the chance to benefit from a decent return over the life of your investment will be too good an opportunity to pass up.
The bonds could be ideal for older savers who are willing to tie their money away for the promise of a good payout at the end of the term, and there's nothing to stop you from opening a version of each account – meaning you can stash away up to £20,000 each, or £40,000 per couple. But, you'll need to be on the ball if you want to make sure you benefit, as NS&I is only allowing £10 billion to be deposited into the accounts – equating to around one million customers – and it's thought the bonds could "sell out" in seconds.
We'll update you with further details as and when they're revealed, but just make sure you've got your savings ready to go – the Pensioner Bonds won't be around for long!
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