We’ve been receiving a lot of calls in recent weeks from savers interested in the up and coming NS&I 65 plus bonds dubbed ‘Pensioner Bonds’ by the press. It was announced in the budget that older, wiser savers would be given a treat at the start of next year with limited edition fixed rate bonds only available for investors aged 65 and over. The indicative rates for these bonds are well over and above the current rates available with the one year bond expected to pay around 2.8% and the three-year bond around 4.00%, so we won’t be surprised if they fly of the shelves.
At a mere £10,000 maximum per person, per bond, many savers will be disappointed by the amount they can invest and it’s highly likely that many will be left disappointed if they don’t act fast. The government has announced it plans to limit itself to up to £10 billion into the bonds, which is around one million accounts, but to avoid disappointment we suggest that savers act quickly to capitalise on these potentially excellent rates.
Many pensioners have been hit hard over the last couple of years; their monthly income has been dwindling as rates have continued to drop. Unfortunately, although the bonds should pay a very competitive interest rate, they won’t offer monthly or annual income. The three year bond will see interest compounded annually but not paid out until maturity. However the bonds will still provide a much needed boost to the savers overall portfolio.
While these bonds will only be available to over 65s, it could still be great news for all savers, as they may provide the catalyst for banks and building societies to finally start offering better rates and therefore inject some real competition in the market.
According to the Bank of England there is currently just over £1 trillion in savings accounts, so £10 billion is just a fraction of this, just under one per cent. However, with £10 billion potentially flooding out of the banks and building societies and into NS&I, providers may need to react if they want to hang onto this cash.
The banks and building societies may also be hit with a double blow with the government raising Premium Bond holdings from £40,000 to £50,000 in the New Year further diverting savings into NS&I.
What to look out for
Further details, including confirmation of the interest rates, are due to be announced in the autumn statement on the 3rd December, with the bonds expected to go on sale in January.
We’re certainly keeping a close eye on any developments and will keep all our readers and customers up to date as soon as any new information comes to light. So if you know anyone who would benefit from this information, please ask them to sign up for our Rate Alerts.
In the meantime, if you’ve set your money aside for the Pensioner Bonds but are looking for better returns for other funds too, why not give us a call? It’s free on 0800 321 3581 and we’re always happy to help talk through various options to help better your returns.
@savingschampion
Find us on Facebook