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#UK Pensioner Bonds - What's the Catch with 4% interest?
21. Jan 2015 at 18:36
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The new UK Pensioner Bonds: 4% over-65 savings - what they don't tell you

Below is from Martin's Money Tips......

"They smash standard best buys, but which to choose? Can under-65s access them? And can you get your cash out?

Late last week the Govt launched its pre-election bribe to over-65s via its savings arm NS&I - the 65+ Guaranteed Growth Bonds (aka Pensioner Bonds). Promptly its site form crashed & phone lines hit gridlock, causing much angst as sadly it isn't selling them via the Post Office. Our Pensioner Bonds guide has full pros & cons & analysis. In short...

Pensioner BondsThe basics. The NS&I Pensioner Bonds are just fixed-rate savings for those who've had their 65th birthday:

- You can put up to £10,000 in the 1yr bond at 2.8% (you'd earn £280 pre-tax after the year) AND up to £10,000 in the 3yr bond at 4% (you'd earn £1,250 pre-tax after 3 yrs).
- If you need to withdraw early, you can, but you'll lose 90 days' interest if you do.
- You pay normal savings tax on interest (eg, 20% for basic rate payers). Non-taxpayers can reclaim tax once the interest is paid (you can't use the standard R85 form).
What they don't tell you. To make these accounts work best for you, follow these rules...

a) If you can only do one - do the 3yr. The bond pricing is rather strange. Put cash in the 3yr bond and withdraw after a year and you lose 90 days' interest, but that's still an effective rate of 3.01%, beating the 1yr. See 1yr v 3yr.
b) How to use it for income. Strangely, as many pensioners use savings to generate income, these bonds just add interest annually. However, there is a trick to get round this - see Use pensioner bonds for monthly income.
c) The bonds aren't for all pensioners. They're for over-65s. Many women claim the state pension before 65 but that won't entitle you to these. To be fair to NS&I, it calls these '65+ Guaranteed Growth Bonds'.
d) They could sell out in weeks. Over £1.15bn of the £10bn has gone already, and demand is huge. NS&I is playing this down to reduce web strain, but we think there's a big chance they'll be gone in weeks. To be safe, apply now.
I'm too young, can I give my parents/grandparents cash to save? The terms say people must save "for their own benefit" and bonds "can't be purchased by one person on behalf of another". So in the strict sense, no. Some do this with 'no strings attached' gifts but there are risks. See full Can I use my parents' pensioner bonds? info.

What are the nearest equivalents if I'm not entitled to Pensioner Bonds? There's Santander 123 paying 3% on £3k - £20k, you can save tax-free in an up to 2.25% fixed cash ISA or 2.51% fixed savings. See full top savings, or if you're prepared to up the risk slightly for potential returns of up to 6%, consider Peer-to-Peer Savings."

Comments taken from the newsletter.
http://www.moneysavingexpert.com/savings/pensioner-bonds
« Last Edit: 21. Jan 2015 at 18:38 by admin »  

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