Nationwide warning over Chancellor's new pensioner bonds

British Chancellor of the Exchequer George Osborne holds the budget box outside 11 Downing Street in London (Leon Neal/AFP/Getty Images)

Nationwide has warned the Chancellor George Osborne against pitching his new pensioner bonds too generously when they are launched next year.

“The kind of rates which are being suggested are way outside the normal competitive range,” said chief executive Graham Beale. “I am sympathetic to what is being done by the Chancellor. But we simply cannot compete.”

George Osborne announced the new pensioner bonds from National Savings & Investments allowing over-65s to invest up to £10,000 in one-year or three-year savings bonds. The rates will be announced in this year’s Autumn Statement but early estimates are 2.8 per cent for one-year bonds and 4 per cent for a three-year one.

Beale pointed out that Nationwide’s own rates for loyal customers range from just 1.4 per cent to 1.7 per cent. “It would have been nice if the Chancellor had talked to us and seen if we could have offered something equivalent together,” said Beale.

He said that he thought the outflows of savings from his building society into pensioner bonds could well be matched by inflows into new cash ISAs where he welcomed the Chancellor’s decision to raise the limits. He said: “It’s difficult to say but net/net it will probably balance out.”

Nationwide’s underlying profits, before exceptional items, rose by 113 per cent to £924 million which Beale described as “our best results for many years”.

Gross mortgage lending rose by 31 per cent to £28.1 million giving the society a 14.9 per cent share of the market which is well above its long-term trend of 10 per cent to 11 per cent. In the first-time buyer market, Nationwide saw a 37 per cent rise in loans and took a 20 per cent share of the market.

Savings rose by £4.9 billion to £130 billion with the new Loyalty Saver accounts attracting £9.2 billion. Having raised an extra £550 million new capital in March, Nationwide has passed the Prudential Regulation Authority’s leverage ratio of 3 per cent well before the December 2015 deadline.