Older, Wiser, Eligible?

If you’ve been looking to better the derisory rates of interest currently on offer on your cash deposits, you’ve no doubt heard about “Pensioner Bonds”. Unfortunately, if you haven’t hit 65 yet you won’t be eligible, but for those who do qualify, there’s already been a lot of interest.


“Pensioner Bonds”, or 65+ Guaranteed Growth Bonds to use their official name, were first muted by the Chancellor in his March 2014 budget statement. We were promised market leading rates, but it wasn’t until late December that Mr Osborne provided the detail.


We now know that the interest rates will be set at 2.8% for the 1 year product and 4% for the three year product. This compares very favourably to the “best buy” rates currently available at the time of writing, of 1.85% and 2.51% respectively.


Not only could that mean additional interest of £447 gross for the maximum investment of £10,000 over a 3 year period, but you have the backing of National Savings & Investments (NS&I). NS&I is backed by HMRC Treasury, so your money is 100% secure (well unless the UK itself goes bust and then we’ve all got bigger problems!)– this in itself is a bonus for many savers, given recent instability with some of the well-known banks.


So what else do you need to know?

Eligible applicants can put up to £10,000 into each of the bonds; a maximum of £20,000 per person or £40,000 per couple. The minimum investment is £500 and interest is credited at maturity (or annually on the 3 year product). You can hold the bonds in joint names, but you both have to be over 65.


On 15th January the bonds were opened to applications and if you’re interested, the advice is to act fast. With only £10 billion of bonds available, that’s only enough for 500,000 pensioners if they all pay in the maximum amount. On launch day the NS&I website was struggling to cope with demand and phone lines were reportedly constantly engaged…


Despite the headline rate, these bonds won’t be for everyone. Wherever possible make sure you are maximising your tax free ISA allowances as even a low interest rate looks better when you don’t have to take any tax off.


For a full review of your cash management strategy, contact our Financial Planning department for a no obligation exploratory meeting.