Come January 2015, a new Pensioner Bond is set to be launched by the government, issued by National Savings and Investments, that will be accessible to everyone aged sixty-five and over.
The new Pensioner Bond has been designed to help out the many pensioners across the country who have seen their incomes fall dramatically as an unintended consequence of the continued low interest rates enforced over the last few years, in a bid to support the economy.
Though Chancellor of the Exchequer George Osborne noted that the new Pensioner Bond will pay market-leading rates, the exact figures are to be set in the autumn in order to ensure they can secure the best possible rates for pensioners who wish to participate; though Mr Osborne noted during the earlier Budget 2014 that “…our assumption is 2.8% for a one year bond and 4% on a three year bond — that’s much better than anything equivalent in the market today.”
£10,000 Saved Into Each
During Budget 2014 the Chancellor declared that up to £10 billion bonds will be issued, with a maximum of £10,000 being able to be saved into each; allowing pensioners to save £20,000 into new Pensioner Bonds overall. Mr Osborne concluded that this will create at least a million market-leading savings bonds.
Interest payments on both bonds (regardless of whether both, or just one are used) are due to be taxed directly in line with each individual pensioner’s savings income at their personal tax rate.
Though most analysts welcomed the news to help individual pensioners who have seen their savings significantly reduced due to purposely-enforced interest rates in recent years, Simon Rose of campaign group Save Our Savers noted that it feels like somewhat of an attempt to “woo” older voters ahead of next year’s general election, saying:
“While savers would be foolish not to take out one of these bonds if they qualify, we would have liked the Government to remove tax on savings income — a promise David Cameron used to woo voters in 2009.”
Premium Bonds Cap Raised
Alongside the announcement of the new Pensioner Bond, Chancellor George Osborne raised the current cap on investments in Premium Bonds from £30,000 to £40,000 starting 1 June 2014 — the first time the Premium Bonds cap has been raised in over a decade.
This cap will be raised another £10,000, to £50,000, for tax year 2015-16.
To provide a further incentive for savers, National Savings and Investments will, from August 2014, start offering two £1m prizes per month, rather than one; doubling savers’ chances of getting their hands on the £1m prize, though reducing their chances of winning a smaller prize due to the overall interest rate remaining unchanged, at 1.3%.
Understanding Pensioner Bonds
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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.