Move fast to get a Pensioner Bond

Last week the Treasury announced the rates for the new pensioner bonds, announced in March’s Budget, which will be issued by the government-backed National Savings & Investments in January.

The one-year bond will pay 2.8 per cent while the three-year bond 4 per cent. The rates are much better than any other savings accounts currently available on the market.

“The rates are head and shoulders above the nearest competition, paying 51 per cent more than the average top five one year fixed rate, and 61 per cent more than the average top five three year fixed rate,” said Anna Bowes of SavingsChampion.co.uk.

But only those aged 65 and over will be allowed to invest in the bonds. The most you’ll be allowed to save will be £10,000, but you can put that much in in each bond, meaning pensioners can stash £20,000 each in the high-paying accounts.

However, the government has set a £10bn limit on the bonds. Effectively that means if everyone invested the maximum £20,000, only half a million pensioners would be able to use the bonds.

Demand is likely to be high. “There is a danger that these bonds will become over-subscribed and this could mean they are only handed out on a first-come, first-served basis,” warned Rachel Springall of Moneyfacts.co.uk.

If that happens it could leave anyone applying by post missing out as online and telephone applications will beat them to the punch. Online is likely to be the best way to apply, once we know the launch date.