New NS&I Pensioner Bonds launch to a stampede of interest
Old? Looking for somewhere to invest some cash for up to three years? As previously announced, the government’s new ‘pensioner bonds’ have been released today to such excitement that you may have to act quickly if you want a piece of the action.
The bonds, which are officially called the 65+ Guaranteed Growth Bond come in two sizes, a one year bond at a rate of 2.8% and a three year bond at 4%. While the 2.8% could be beaten by a currently available cash ISA (as the interest is taxable, unlike that on an ISA), the three year bond is a market leader. And hence likely to be extremely popular.
The bond can be applied for by anyone who is 65 or older on the date of application, regardless of whether they are drawing a pension, but the NS&I website has been creaking today under the strain of myriad applications.
But before you rush to grab your £500 to £10,000 (per bond) to wang into one of these beauties, be aware of the following points. First, the interest is paid at the end of the term, not annually (unless it’s a one-year bond). This means that you won’t actually get an income from it as you go along, you’ll just get more back when you cash in. However, if you are a higher rate taxpayer this also means that you’ll have to pay tax on the interest that has accrued to you years before you actually receive it. True fact.
Also, while you can access your money at any time, if you do cash in your bond before the end of the term, your repaid sum will be subject to an interest penalty equal to 90 days interest. So if you were to invest and then withdraw inside 90 days, you would actually receive less than your original investment.
The bonds are, of course, backed by and funded by the Treasury, who has capped the total savings pot at £10bn for the combined investments in both the one-year and three-year bond. Experts are warning that the high demand could outstrip this limit “within weeks”, so if you are interested, you need to do something now.
If you are 65+ with some spare cash lying around, you can invest online, over the phone or by post. But note that these Bonds will not be available through Post Office branches.