NS&I's 'pensioner bonds' continue to top savings tables
The National Savings & Investments 65+ Guaranteed Growth Bonds will be on sale until 15 May, chancellor George Osborne announced on Sunday. Originally the bonds were due to close once savers had put £10 billion in, sparking fears some might miss out.
So far 610,000 pensioners have bought the bonds, putting in £7.5 billion in just three weeks. The Treasury now expects the total amount in the bonds to top £15 billion.
The bonds pay 2.8% before tax (2.24 after tax) fixed for one year or 4% (3.2%) for three years. They are only available to those age 65 or over. You can put a maximum £10,000 into each bond - a total of £20,000 split evenly between them.
The rates are far higher than you can earn from banks and building societies, where the top rate for one year is 1.76% (1.41%) with the tiny National Counties Building Society or 2.4% (1.92%) for three years from Close Brothers. The best deal for two years comes from Harrods Bank at 2.25% (1.8%).
On easy-access accounts you can earn a top 1.41% (1.13%) with National Counties Online Saver 3.
The top fixed-rate deal on tax-free cash Isas for one year comes from Virgin Money at 1.7% while Post Office pays 1.95% for two years. On easy-access accounts you earn 1.5% including a bonus for the first 18 months with Post Office Premier Isa.
National Savings & Investments also pays 1.5% - with no bonus - but you can't transfer your existing cash Isas into this account. Barclays pays 1.49% on a minimum £30,000 with no bonus, and accepts transfers.
This article was written for our sister website Money Observer
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.