Granny bond will pay 7% to the over-65s (CORRECTED)

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The Independent Online

THE new 'granny bond' promised in the Budget will go on sale from today with an interest rate of 7 per cent, writes Vivien Goldsmith.

The Pensioners Guaranteed Income Bond pays monthly income and gives the over-65s a two-way bet on interest rates.

If rates fall they will be cushioned for five years but if rates rise investors may close the investment by giving 60-days' notice and sacrificing 60-days' interest.

The bond is only available to those over 65. In response to protests from women pensioners under 65, Anthony Nelson, Economic Secretary to the Treasury, said the Sex Discrimination Act prevented the Government from offering it to men and women at different ages. He pointed out that the Government had announced plans to equalise the state retirement age.

The bond pays interest on the 19th of every month. This must be paid directly into a bank or building society account.

The minimum investment is pounds 500, which produces a monthly income of pounds 2.92. The maximum holding of pounds 20,000 gives a monthly income of pounds 116.67.

Investors may call freephone 0500 500 000 for an application form. The bonds will go on sale in post offices on 10 February. Those who apply by sending in a coupon from a newspaper advertisement have a 28- day cooling off period in case they want to change their mind.

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