In a matter of weeks the new Bonds for investors aged 65 or over, dubbed Pensioner Bonds, will hit the market and demand is expected to be high. Although the confirmed rates on the bonds are very competitive, there are some less than positive points. The maximum is restricted to £10,000 per person, per bond and you can’t take a monthly income from them. In fact the three year bond will not even pay an annual income – it’ll simply roll up and pay the full amount back at the end of the term. However there’s no denying that the rates in the current climate really speak for themselves.
Each saver can deposit up to £10,000 per bond, so a married couple could invest up to £40,000 in total. But for those younger savers or those looking to squirrel away more that the restricted maximum, what are the alternative cash options?
High Interest Paying Current Accounts
Offering some of the best variable rates on the market, these pay up to 5% AER but there’s a catch. Generally only low balances earn the most interest and there are Terms and Conditions that must be navigated, otherwise there may be fees and charges that could negate any interest earned. However for savvy savers, by using a number of these pseudo savings accounts, they can build up a fairly substantial sum, earning the best easy access rates around.
Unlike the Pensioner Bonds, Cash ISAs are tax free with an allowance of up to £15,000 per person.
Fixed Rate Bonds – Annual income
Fixed rate bonds are a like for like with the Pensioner Bonds.
Fixed Rate Bonds – Monthly income
One of the negative features if the Pensioner Bonds is there is no monthly income option.
NS&I 65 Plus Bonds - Pensioner Bonds
A combination of the above
With the prospect of a base rate rise on the cards next year, many savers may be wary about locking into longer term fixed rates, in the hope of improved rates to come. Our concern is the continued disconnect between the Bank of England Base Rate and savings rates in recent years, with many existing savings rates plummeting. That’s why we believe in a more balanced approach to saving; setting some money into fixed rates as well as accessible variable rates, such as high interest paying current accounts, so that savers can access the best long term rates available now, while leaving some money available should better rates come onto the market.