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  • FIRST POST
    • MSE Luke
    • By MSE Luke 9th Jan 18, 9:29 PM
    • 261Posts
    • 69Thanks
    MSE Luke
    Does your Pensioner Bond mature this Sunday? What should you do with the cash?
    • #1
    • 9th Jan 18, 9:29 PM
    Does your Pensioner Bond mature this Sunday? What should you do with the cash? 9th Jan 18 at 9:29 PM
    'Pensioner Bonds are simply fixed-rate savings accounts, launched in January 2015, paying a massive 4% interest for the three-year version (and 2.8% on the one-year version which matured in 2016) - though, as the name suggests, they were only available to those 65+...'

Page 1
    • John Gray
    • By John Gray 10th Jan 18, 7:02 AM
    • 5,100 Posts
    • 2,746 Thanks
    John Gray
    • #2
    • 10th Jan 18, 7:02 AM
    • #2
    • 10th Jan 18, 7:02 AM
    From my point of view, the problem with the "Pensioner Bond" and its successor is that HMRC requires that you account for the notional interest paid in every tax year, when you don't receive any actual interest until the bond matures.
    • bowlhead99
    • By bowlhead99 10th Jan 18, 10:40 AM
    • 7,130 Posts
    • 12,945 Thanks
    bowlhead99
    • #3
    • 10th Jan 18, 10:40 AM
    • #3
    • 10th Jan 18, 10:40 AM
    From my point of view, the problem with the "Pensioner Bond" and its successor is that HMRC requires that you account for the notional interest paid in every tax year, when you don't receive any actual interest until the bond matures.
    Originally posted by John Gray
    Well, it's not 'notional' interest - it's actual interest. It's credited to your account every year and made available to you so that the 4% interest compounds up and lets you have an overall higher and better return than if the same simple interest rate was used on the deposit for the three years and credited at the end.

    Of course, most people with a 3-year product choose not to close out their account and walk away with the money before the end of the three-year term, because there would be a penalty for breaking their contract early. However, you had the right to do that if you want.

    As such, from an HMRC perspective the interest has been paid or 'made available' to you at the end of each 12-month period from when you made your initial deposit, and therefore you need to pay tax on it.

    If you don't like the system, I guess you could emigrate and become a tax resident of a country which treats interest that's been made available to the depositor in some different manner - if you can find one.
    • digannio
    • By digannio 10th Jan 18, 10:52 AM
    • 182 Posts
    • 95 Thanks
    digannio
    • #4
    • 10th Jan 18, 10:52 AM
    • #4
    • 10th Jan 18, 10:52 AM
    If you are going for a one year fix you can get 1.9% from BLME (sharia), not guaranteed but effectively is and compensation scheme backed.
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