DIY Investor Magazine
/
2015 Issue
7
In the first two days of going on sale this January,
£1.15 billion worth of Pensioner Bonds were sold to
110,000 Britons over the age of 65. It’s not hard to
see why they are so attractive.
This government backed product with a maximum
investment of £20,000 per person, pays 4% on the
three year bond and 2.8% on the one year.
Compare that to rates available in savings
accounts or even that paid on the safest of
government debt, and they really are market
beating.
Operated by National Savings & Investment, the
intention is to help older savers achieve a better
rate of income at a time when there has been
a prolonged squeeze on interest rates. Retired
investors tend to be more reliant on fixed incomes
than at other life stages.
Pensioner bonds are proving popular to many
older investors already but they are limited in the
amount that can be subscribed and the amount
on offer: government has authorised the issue of
£10 billion Pensioner Bonds.
Not only that, but these are incompatible with
traditional tax efficient wraps such as Individual
Savings Accounts (ISAs) which means for basic
rate taxpayers the effective interest on the three
year bond is 3.2%.
Welcome as this initiative is, it cannot be a
complete answer to older savers’ needs. DIY
investors will place it in the armoury besides
other innovative ways of achieving an income,
managing risk and protecting capital.
RUSH TO PENSIONER BONDS
SHOWS DEMAND FOR INCOME
THE INTENTION IS TO HELP OLDER SAVERS
ACHIEVE A BETTER RATE OF INCOME
AT A TIME WHEN THERE HAS BEEN A
PROLONGED SQUEEZE ON INTEREST RATES.
