PENSIONSANDSAVINGS.COM

15th January 2015

 

• At last some good news for pensioners’ savings
•  NS&I 65+ Guaranteed Growth Bonds on sale from today – guaranteed by the Government
•  These are market-beating bonds with great interest rates and fully backed by the Treasury
•  Don’t panic, but if you’re over 65 and have money sitting in a savings account, the sooner you apply, the sooner it can earn more for you

National Savings and Investments (NS&I) has this morning launched its long awaited new issue of National Savings bonds for people aged over 65.  The Chancellor announced these so-called ‘Pensioner Bonds’ in his Budget last March, especially to help the over 65s who have been hit by the dramatic drop in interest rates on their savings.

What are the bonds called?  They are called 65+ Guaranteed Growth Bonds

 What are the positive features of the bonds?  They are backed and guaranteed by the UK Treasury, so there’s hardly a risk of your bank or building society becoming bankrupt.  They offer interest rates that are very attractive in the current low-rate environment.

What kind of bonds are they?  There are two issues of these bonds, each paying market-beating interest rates.  The one-year bond will pay 2.8% interest and a three-year bond paying 4% per annum.  These rates are around twice as high as those offered by most bank or building society savings accounts.

How much can I apply for?  You can apply for a minimum of £500 and maximum of £10,000 in each of the bonds.  That means each person can apply for up to £20,000 of the bonds and a couple can invest up to £40,000.  The Treasury will allow NS&I to issue a maximum of £10billion of these bonds.  If every saver invested the maximum in each bond, then only 500,000 people will be able to invest, out of well over 10million over65s in the UK.

How can I apply?

Online: You can invest on line by visiting http://www.nsandi.com/65-guaranteed-growth-bonds.  By phone:You can apply by phone on a Freephone number 0500 500 000 or you can call +44 1253 832007 from outside the UK or on a mobile.  By post: You can download an application form or call 0500 500 000 for an application form to be sent to you, then send a cheque with the completed form to NS&I, Glasgow, G58 1SB.  You won’t be able to buy the bonds through the Post Office.

Will the income be tax-free? No the income from the bonds will be taxable, with basic rate tax of 20% deducted before the interest is paid to you.  If you are a higher rate taxpayer, you will need to declare the interest you receive on your tax return.  If you are a non-taxpayer you will need to claim back the tax that has been deducted.  There are no ISA or other accounts that pay more than the 4% annual interest on the three-year bonds.

Will the interest be paid monthly?  No, all the interest will be paid at the end of the term i.e. after 12 months or after three years.

Can they be cashed in early? If you want your money back before the end of the term, you will forfeit 90 days’ interest.  On £10,000 in the three year bonds, that amounts to a penalty of about £100.

Is it fair that they are only available for the over 65s?  The Government is only offering these bonds to older savers, partly because this group is most reliant on savings income, with many having built up savings to support themselves in retirement, are no longer working and have found their income decimated by low rates.  Younger savers may be able to take more investment risk, rather than relying on cash savings and, if they are still working, perhaps the Government believes they can make up for lower savings income more readily than those in later life.

So what should I do now?  If you are over 65 and have money in bank or building society accounts which you intend to keep there for at least the next one or three years, you should seriously consider applying for these new NS&I 65+ Guaranteed Growth Bonds.  Go to http://www.nsandi.com/65-guaranteed-growth-bonds and read more about them and you can apply on line.  These market-beating interest rates will not last for ever, once the £10billion has been issued there will be no more – they offer really great deals for the over 65s.

Should I panic?  I wouldn’t expect these bonds to sell out too quickly because they do need you to be able to tie up £20,000 of cash savings for some time.  However the rates they offer are so attractive that if you’re over 65 and do have that kind of money sitting in a savings account, the sooner you apply, the sooner your money can start earning more for you.