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