Pensioner Bonds Guide

Archi_Bald

John_Gray wrote: »

Yes, but it doesn't say WHEN!

Surely if interest is paid only at the end of the one- or three-year period, then the tax is due only at that time.

Not sure I understand what you are trying to say but here goes anyway...... Savings accounts don't tell you when you have to pay tax, and they don't change tax legislation. Pensioner Bonds are no different in that regard.

If you have read the information on the NS&I website, you will know that the Pensioner Bonds will pay interest on anniversary (which is also maturity for the 1 year one). As with any other savings account, interest counts as income for the tax year it is paid in. For example, if you receive interest in 2014-15 and you are a higher rate tax payer in 2014-15, you have to include this interest in your self assessment that is due either by end October 2015 (if done on paper) or end of January 2016 (if done online). Depending on your overall assessment, you then may have to pay some extra tax.

As also stated on the NS&I website, tax at basic rate will automatically be withheld at source, meaning that as a basic rate tax payer you don't have to worry about making any payments. If you are a non-tax payer, you can claim the interest back after the end of the tax year in which you received it (you have up to 4 years to make such a claim).

How to determine whether you are a basic or higher rate or a non tax payer is something you need to know regardless of the Pensioner Bonds or other savings accounts.

EDIT: beaten to it by Rollinghome, but as I typed the lot anyway, I'll just leave it here

Archi_Bald

Rollinghome wrote: »

Those two articles get my vote for the daftest financial story of the year.

Agree, and it also puts question marks over the credibility of that savingschampion outfit as they shouldn't really have lent their name to such a non-story.

Primrose

have missed a few posts since coming on here earlier, but can anybody speculate how you provide the money if you want to buy these bonds online? If you try and buy the bonds via a Debit Card, I envisage most cards will not have a limit sufficiently high and the potential purchase is likely to be aborted by the bank with whom your account is held. Or is payment likely to be by bank transfer via an account and sort code in the same way you pay HMRC online ?

mgdavid

Primrose wrote: »

have missed a few posts since coming on here earlier, but can anybody speculate how you provide the money if you want to buy these bonds online? If you try and buy the bonds via a Debit Card, I envisage most cards will not have a limit sufficiently high and the potential purchase is likely to be aborted by the bank with whom your account is held. Or is payment likely to be by bank transfer via an account and sort code in the same way you pay HMRC online ?

The only practical limit is dictated by the balance in your account!
see this thread, especially posts 8 & 9:
https://forums.moneysavingexpert.com/discussion/2980206

FOREVER21

Primrose wrote: »

have missed a few posts since coming on here earlier, but can anybody speculate how you provide the money if you want to buy these bonds online? If you try and buy the bonds via a Debit Card, I envisage most cards will not have a limit sufficiently high and the potential purchase is likely to be aborted by the bank with whom your account is held. Or is payment likely to be by bank transfer via an account and sort code in the same way you pay HMRC online ?

Not sure but does a debit card have a limit? I have never seen any reference to one on my account.I always thought as long as I have money in the account any use of the card would be covered.

If you have sufficient in your account then the transaction should go through.

colsten

Tell your bank beforehand that you are planning to purchase these bonds so you can use your debit card. If they still decline the payment, you can ring them there and then, and they will let authorise the re-try after you have successfully passed security.

Though judging by other NS&I accounts, you will need to register a linked account (i.e. a current account), and you will also be able to make a faster payment from that account.

Depositing shouldn't be your top concern - opening the account is number 1 priority. Once you have an account, you have a few days to make your deposit. So you can even send a cheque if you are so inclined.

colsten

FOREVER21 wrote: »

Not sure but does a debit card have a limit? I have never seen any reference to one on my account.I always thought as long as I have money in the account any use of the card would be covered.

If you have sufficient in your account then the transaction should go through.

I agree the limit is your available balance. But you would very much hope a bank's automated fraud system kicks in if suddenly there is a £10K request that doesn't fit with the pattern the card has been used in. Temporary blocks on debit cards are nothing unusual, and getting them lifted is easy too - just takes one call to the bank.

FOREVER21

Archi_Bald wrote: »

Of course they have received the money. It sits in their savings account and earns further interest.

Also, it's only higher rate tax payers who would have to declare interest on money which is still locked up. Hardly anything that would break their bank, and no different to most other fixed term savings accounts. A non-story.

Not quite true. Anyone subject to self assessment by HMRC, will need to declare the interest on their return. Thus you could have someone paying the tax but not actually having access to the money, although as you say it is in their account.
Another case will be someone( not higher rate payer) subject to self assessment, fills in their tax form, shows tax paid and if they are a non- taxpayer they will then get an refund from HMRC. All this because NS and I have not bothered to install the R 85 procedures, thus creating unnecessary work.

mgdavid

FOREVER21 wrote: »

....... All this because NS and I have not bothered to install the R 85 procedures, thus creating unnecessary work.

given a choice between the State spending time and money (i.e. my taxes) on R85 procedures, and the individual doing it as part of their self-assessment, I'd plump for the individual doing it every time.

Archi_Bald

FOREVER21 wrote: »

Not quite true. Anyone subject to self assessment by HMRC, will need to declare the interest on their return. Thus you could have someone paying the tax but not actually having access to the money, although as you say it is in their account.

You are right, I should not have said it's only HR tax payers who need to declare it - anyone who fills in a tax return has to declare their income from savings. But only higher (and additional) rate tax payers need to pay extra tax on their savings interest. Basic rate tax payers do need to declare if they make a tax return but they do not have to pay any additional tax on the interest received as their tax has already been withheld at source. Nothing new for Pensioner Bonds, it's always been the case.

Worth re-iterating that those who have to pay additional tax have to pay it only on money they have received. The fact that the money received is invested is neither here nor there - it is money received. This is also nothing new and not an alien concept - multi-year fixed term savings accounts which periodically pay interest into the same account and offer no withdrawals or withdrawals at a penalty only have been around for ages.

FOREVER21 wrote: »

Another case will be someone( not higher rate payer) subject to self assessment, fills in their tax form, shows tax paid and if they are a non- taxpayer they will then get an refund from HMRC. All this because NS and I have not bothered to install the R 85 procedures, thus creating unnecessary work.

I second mgdavid's response to this point.