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Pensioner Bonds – what you need to know

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In the March 2014 Budget, Chancellor George Osborne announced that National Savings & Investments (NS&I) would launch special ‘pensioner bonds’ for over 65s in January 2015. Here’s what you need to know to make the most of them.

What are the products being launched? 

NS&I has said that there will be two products available – a one-year and a three-year bond, with two different levels of interest.

The bonds are available only to customers aged 65 or over and customers can make a maximum investment of £10,000 investment per product – so you could invest up to £20,000 across both types of bond.

For more information about the products, see the NS&I website.

How do they compare to regular savings products?

The rates available are currently well in excess of current Best Buy rates on the market. NS&I has a tranche of £10bn available for these bonds, meaning they could cater for 500,000 customers if they all chose to invest £20,000. However, not everyone will want or be able to invest the maximum amount, so the actual number of customers is likely to be higher.

When will they be available to buy?

NS&I has not specified a launch date for these products other than January 2015 – and the exact launch date will only be confirmed once the products actually go live.

Because of the rates available and relatively limited amount available for investment, NS&I believes the products are likely to be very popular and only remain on sale for a few weeks.

For more information about when the Pensions Bonds will launch, NS&I has an email update service that you can sign up to here.

What else should I consider?

A lot of retirees will be eligible to invest in these products and many will likely be interested in doing so. But before rushing out with your chequebook, there are factors you may wish to consider.

Other products are available, which offer different terms that may be more suited to your individual circumstances. High-street and online savings products are not typically age restricted to over 65s only and the range of products on offer means you can often choose whether you would prefer to receive monthly or annual interest payments. You should also consider whether you can afford to tie up your savings for a period of time – of up to three years.

Skipton offers a range of saving products, such as regular savings accounts or cash ISAs.

It’s also worth remembering that many pensioners do not pay income tax on their savings, but the NS&I’s pensioner bonds will automatically apply the basic rate of tax to any money invested in these products – it will be up to you as a customer to complete an R40 form to get your tax refunded.

This article has been commissioned by retiresavvy and any opinions voiced are the author's own.

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