• Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more
 

George Osborne: Pensioner bond scheme to be extended

A government-backed pensioner bond offering competitive rates of up to 4% interest is to be offered for a further three months, George Osborne has said.

The chancellor told the BBC he was extending the deadline for over 65s to apply to May since the idea had proved "enormously popular and successful".

More than £1bn in bonds were sold in the first two days of the scheme and 600,000 people have now signed up.

Labour said Mr Osborne was trying to "erase the memory" of previous cuts.

National Savings and Investments(NS&I) are offering up to £10bn in bonds.

However, Mr Osborne said he expected this figure to be extended to £15bn and the deadline moved until after 15 May, a week after the general election.

Mr Osborne told the Andrew Marr show that the bond - on offer to the over 65s - had been "the most successful saving product this country had ever seen", with 110,000 pensioners signing up in the first two days after they went on sale in January.

"We will guarantee that it remains on sale for a further three months because this government backs savers and supports people who do the right thing," he said.

Mr Osborne rejected suggestions that it was unfair for those under the age of 65 to be subsidising a scheme that only better-off pensioners could take advantage.

He said pensioners, as well as other savers, had suffered because interest rates had fallen to historic lows of 0.5% over the past five years due "to a deliberate act of government policy".

"Many of these pensioners do not have large sums of money," he said. "They have relatively small savings. They have had these very low interest rates...We have had activist monetary policy to keep interest rates low."

He added: "We need to support savers in our country. That is one of the things that went badly wrong in Britain 10 years ago.

"I think you have to see this in the context of a plan where they have been very low interest rates to support the economy during this difficult period. That has hit savers. I think it is perfectly reasonable for a chancellor to say I want to support savers."

But the free market think tank, the Institute for Economic Affairs, criticised the extension of the scheme, arguing that it was distorting the market.

"This announcement well and truly proves that we are not all in it together," said the organisation's director general Mark Littlewood.

"Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthy pensioners from the working-age population."

"Pensioner bonds have never been anything other than a gimmick that will benefit pensioners at the expense of the taxpayer, and it beggars belief that the government is prolonging such a foolish policy."

Mr Osborne said the cost of extending the scheme would be in the region of "several hundred million of pounds".

Labour's shadow Treasury minister Chris Leslie said pensioners had suffered under the coalition thanks to the rise in VAT and changes to age-related personal allowances.

"Don't be surprised if George Osborne, as we get closer to an election, tries to give away all sorts of things when, actually, he is trying to erase the memory of how much he has taken away from pensioners."

"And he has not said where he is going to get the money for this. What other public services are going to suffer as a result?"

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

How the bonds work

The scheme is aimed at those aged 65 or above who have at least £500 to invest and want a guaranteed rate of interest.

The one-year bond pays an annual interest rate of 2.8% before tax, and the three-year bonds pays 4% before tax. Interest will be added on each anniversary after investment.

Investment is limited to £10,000 in each bond, making a maximum of £20,000 per person.

Financial advisers have pointed out that the best one-year bond on the open market is currently paying about 1.85% interest and the best three-year bond is paying 2.5%.

Tax is deducted from the interest paid on these bonds, however non-taxpayers can claim this back from HM Revenue and Customs (HMRC). Basic rate taxpayers must declare the interest if they complete a tax return. Higher and additional rate taxpayers need to declare the interest to HMRC and pay any further tax due.

 

Source:  BBC.co.uk

Sam: 9th Feb 2015 15:37:00

 

Latest News

Drawdown is booming – so perfect your investments
Drawdown is booming – so perfect your investments

Read More >>

Remortgaging surge to continue – get the best rate
Remortgaging surge to continue – get the best rate

Read More >>

Equity release helps first-time buyers
Equity release helps first-time buyers

Read More >>

“Challenging conditions” for personal pensions
“Challenging conditions” for personal pensions

Read More >>

Remortgage customers: beware of rate rises
Remortgage customers: beware of rate rises

Read More >>

See all News...
  • Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more