22nd October 2014
Older savers looking forward to the launch of the Government’s Pensioner Bonds in January have learnt that it will not provide a monthly income.
The Chancellor announced the launch of the NS&I bonds in his last Budget as a measure to help over-65s to boost their income and he said the products would pay top rates.
But, according to This Is Money, the bonds will not pay monthly returns, which had been expected given that the products were pitched at helping older savers who are generally looking for income.
Previously, NS&I’s Pensioners Guaranteed Income Bonds, paid out interest monthly, but they were withdrawn from sale in 2008.
In March, the Chancellor said: “Many pensioners have seen their incomes fall as a consequence of the low interest rates that Britain has deliberately pursued to support the economy.
“It’s time that Britain helped them out in return. So we will launch the new Pensioner Bond, paying market-leading rates.”
However, NS&I confirmed to the newspaper that savers buying one-year bond, which will be called the 65 Plus bond, will not receive any interest until the end of the 12 months.
Those buying the three-year bond will have to wait until the end of its term as well.
In a further logistical hurdle, interest will be paid out after 20% tax has been deducted, which means savers who no longer pay tax will have to claim this sum back from HM Revenue & Customs.
Despite this disappointing news for savers, the bonds are still likely to sell out extremely quickly as they are set to pay top rates of almost double that offered by other banks and building societies
The rates will be confirmed in the Chancellor’s Autumn Statement on December 3, but they are expected to be 2.8% before tax on the one-year bond and 4% before tax on the three-year product.
NS&I has set a limit of £10 billion on the amount of bonds it will offer, while individuals may invest up to £10,000 each per bond.