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Last week saw the launch of Pensioner Bonds from the NS&I. The idea behind them is to give pensioners a higher return on their savings than they are currently achieving in their Bank and Building Society deposits.

In essence, they are a bond offering 2.8% return for one year and 4% for three years and are available to anyone over the age of 65. You are allowed to invest anything from £500 up to £10,000 per issue of each bond. Be warned though, interest will be paid net of basic rate tax, as the NS&I are not party to the R85 scheme. Also, as with most fixed term products, penalties would be incurred for early withdrawals.

Prior to the launch, NS&I said they would expect the bonds to be still on sale in the new tax year. However, considering that a staggering £1.153bn (of the £10bn allocation) had already been sold to 110,000 savers in the first two days alone, this now seems unlikely.*

It is interesting that these have been launched with the election coming up in May. Pensioners make up a large proportion of the voting population, and many have had concerns over savings rates for the last few years (and quite rightly so). Could this be an attempt to pacify voters? I will let you decide…

*source Daily Telegraph Online

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