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Didn’t get a Pensioner Bond? Find the alternatives

Didn’t get a Pensioner Bond? Find the alternatives

Category: Savings

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 It is now over 6 months old so the content may be out of date.

The Pensioner Bond is no more. It was officially withdrawn from sale last Friday, and the latest update from the Treasury revealed that more than a million older savers benefited by investing over £13 billion in these market-leading accounts. If you weren't one of them, or were too young to qualify, fear not – we've got some alternatives!

The most popular financial product ever

The bonds were the biggest-selling retail financial product in Britain's modern history, with the accounts exceeding official expectations. Launched in January this year, the original plan was for the bonds to be closed after £10 billion had been invested, but in February it was announced that the deadline would be extended to 15 May 2015, to ensure that those aged 65 and over had time to apply.

Happily, it seems that many took advantage of the opportunity, and there's a reason that these bonds were so popular. By offering rates of 4% for the three-year bond and 2.8% for the one-year counterpart, they truly offered the best rates in the market. "The 65+ Pensioner Bonds have been a huge success," said Chancellor George Osborne. "They're now helping over a million older savers [by] boosting the return on their savings and securing a more comfortable financial future."

The next best thing!

Now, the bad news. The withdrawal of the bonds, formerly on sale through NS&I, means that the best available rates have been snatched from your grasp – but if you didn't qualify anyway, you're probably not too concerned! We're here to help no matter why you missed out, so read on to check out a few alternatives.

  • Best one-year bond. While it may not come close to the 2.8% previously offered by the Pensioner Bond, the top rate for a one-year deal can be found from United Bank UK. It's 1 Year Fixed Term Deposit pays a market-leading 1.91% from a minimum investment of £2,000, a great choice for those seeking a short-term home for their cash.
  • Best three-year bond. AgriBank takes the top spot in the three-year market, with its Fixed Rate Savings Account paying a highly competitive 2.70%. It requires a minimum investment of £10,000 – the maximum investment limit of the 65+ bonds – and can be operated via several channels for the height of convenience.
  • Best for monthly income. One of the key criticisms of the Pensioner Bond was that it didn't offer interest monthly, something that many pensioners rely on in order to supplement their income. That's why a monthly interest account would be a great alternative, and the pick of the bunch comes from Charter Savings Bank. It offers a 95-day notice account that pays 1.80% AER on a monthly basis, and permits withdrawals (subject to the required notice period being observed) for added flexibility.
  • Best rate competitor. If you want a rate that comes close to the dizzy heights of the three-year Pensioner Bond, it could be worth checking out the five-year deal from AgriBank. You'll need to tie up your money for two years longer, but you'll get a rate of 3.30% for the extra commitment.
  • Best for bigger savings pots. Another downside to the NS&I bonds was that they had a maximum investment limit of £10,000, and savers were only allowed one of each. If you've got more than £20,000 to invest, you could consider the top-paying accounts already mentioned, or alternatively you could look to high interest current accounts. These typically only offer interest up to certain balances – Santander offers a rate of 3% for balances between £3,000 and £20,000, for example, while TSB's account pays 5% up to £2,000 – but if you're willing to have a few accounts, the interest could soon add up.
  • Best ISA alternatives. The Pensioner Bonds weren't tax-free, whereas ISAs are – and higher rate taxpayers in particular could benefit. For example, if you invested the full £10,000 in a one-year bond and were in the 40% tax band, you'd earn £168 in interest after tax (£280 before). Conversely, the top-paying one-year ISA from Al Rayan Bank pays 1.90%, leaving you with £190 in interest – £22 more! And, if you're truly on the hunt for real returns and are happy with an element of risk, stocks & shares ISAs could be worth considering – you never know, the return of 4% could pale in comparison.

What next?

Compare savings accounts

Check out the top fixed rate ISAs

Consider stocks & shares ISAs

Find top rates with high interest current accounts

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.