MSE News: Government unveils Pensioner Bond rates – and they're market-leading 12 December 2014 at 5:07PM in Pensions, annuities & retirement planning 27 replies 4.4K views

Former_MSE_Helen

"Pensioner Bonds will pay market-leading rates of 2.8% on a one-year bond and 4% on a three-year bond from January 2015..."

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Government unveils Pensioner Bond rates – and they're market-leading




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PennyForThem_2

With Santander - can't see me changing for this

kidmugsy

PennyForThem wrote: »

With Santander - can't see me changing for this

Happily, you are allowed to do both.

apt

PennyForThem wrote: »

With Santander - can't see me changing for this

Does Santander pay 4% interest?

Pincher

I had some shares that got converted into Santander shares, small potatoes, so didn't think much of it. Over the last five years or so, £500 worth of shares was yielding £40 worth of dividend, 8%!


Funny set up, you can choose to receive shares (scrip dividend) or cash. Analysts say Santander would be in trouble if everybody wanted cash, because they are paying out more than their profit.
So no risk, no gain.

torbrex

Do pensioners really want to tie up their cash for 3 years?
I would have thought they would prefer a monthly income from their savings, I know that I will be looking for that when I retire.
I will be finished with all the long-term investment stuff and looking for a regular income and access to cash if I need it.

PeacefulWaters

torbrex wrote: »

Do pensioners really want to tie up their cash for 3 years?

If they're not going to need it for three years (perhaps because they have capital elsewhere), then why not? The life expectancy of an average 65 year old is a lot longer than three years.

I would have thought they would prefer a monthly income from their savings, I know that I will be looking for that when I retire.

You are making the mistake of pigeonholing pensioners. Many have an excess of income and don't need any more.

I will be finished with all the long-term investment stuff and looking for a regular income and access to cash if I need it.

But others will take a different approach.

torbrex

PeacefulWaters wrote: »

If they're not going to need it for three years (perhaps because they have capital elsewhere), then why not? The life expectancy of an average 65 year old is a lot longer than three years.

Not every one is the same I realise that, I was generalising.

You are making the mistake of pigeonholing pensioners. Many have an excess of income and don't need any more.

Not every one is the same I realise that, I was generalising.

But others will take a different approach.

and yet more will have no spare cash to speak of at all, I realise that, I was generalising.

Pincher

I have been eyeing annuities with a new perspective.


Having a small pension pot means that it is irrelevant to retirement planning, but I still have to think about what to do with it. Assuming it was £25k, drawing down would actually mean paying tax, possibly at the top rate, since I have other income. So £25k becomes £20k. If I then invest it in this pension bond, £10k at 2.8%, £10k at 4%, I would get the equivalent of 3.6% on the £20k, on which I have to pay tax.


On the other hand, if I used the £25k to get an annuity, I could get 6% on £25k! The drawback is of course I will never see the capital again, which is OK for those with no children.




6% on £25k, vs 3.6% on £20k, hmm....

br1anstorm

The Pensioner Bonds look like an attractive opportunity for some..... including me. I have signed up for the email notifications.

We now know the terms (one year or three), and the interest rates. We know they will be offered for sale "in January". Okay - could be the 1st or the 31st. Whatever the date, it seems to be assumed that there will be heavy demand and that the offer might be closed once the Government's target, or limit, is reached.

Now ..... I turn 65 in early February. Will I be able to invest in these bonds on - or after - my birthday? Can I make an advance reservation whenever the January date is announced, for purchase/delivery of the bonds on my 65th birthday in February? Or will I miss out because they'll all be sold out a few days before I hit 65?

It looks rather as if this kind of deadline-exercise by NS&I will be a bit like Black Friday in the supermarkets. Is this really a sensible way for the government to market savings?

John_Gray

You can only invest in these Bonds when you are aged 65 or over. So if they aren't all sold out by your birthday, buy then!

The Govenment, and their hench-persons NS&I, only wants to get in a certain amount of money by this scheme, hence they point out that once they have taken in that amount of money, the scheme will close.