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  • FIRST POST
    • MSE Luke
    • By MSE Luke 9th Jan 18, 9:29 PM
    • 270Posts
    • 77Thanks
    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
    • 5,278 Posts
    • 3,093 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
    • 8,283 Posts
    • 15,135 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
    • 188 Posts
    • 101 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.
    • DINGDONG
    • By DINGDONG 4th Feb 18, 10:10 AM
    • 9 Posts
    • 1 Thanks
    DINGDONG
    • #5
    • 4th Feb 18, 10:10 AM
    • #5
    • 4th Feb 18, 10:10 AM
    This isn't a reply it's a question so I will apologise in advance if I upset anyone. We took our bond out in my husbands name s I wasn't 65. I am now 66 & I do not pay tax. Should we just cash his bond in & take one out in my name ?
    • le loup
    • By le loup 4th Feb 18, 11:51 AM
    • 3,861 Posts
    • 3,873 Thanks
    le loup
    • #6
    • 4th Feb 18, 11:51 AM
    • #6
    • 4th Feb 18, 11:51 AM
    Always use the non-taxpayer as the holder. Except there is now a 1,000 a year tax free allowance for interest.
    • Dazed and confused
    • By Dazed and confused 4th Feb 18, 12:22 PM
    • 3,006 Posts
    • 1,493 Thanks
    Dazed and confused
    • #7
    • 4th Feb 18, 12:22 PM
    • #7
    • 4th Feb 18, 12:22 PM
    Not everyone has sufficient income to be able to benefit from the 1000 Personal Savings Allowance tax rate but they may be able to make use of the equally good 5000 starter savings rate (which like the Personal Savings Allowance rate is currently 0%).
    • foolishsaver
    • By foolishsaver 6th Mar 18, 3:23 PM
    • 3 Posts
    • 0 Thanks
    foolishsaver
    • #8
    • 6th Mar 18, 3:23 PM
    • #8
    • 6th Mar 18, 3:23 PM
    Well, yes, you would have thought that the AER of 4% would be compounded each year. Or you can go with 4% interest on 10K only added each year and get the lower figure of 11,200, which is the figure used in the original MSE blog, so they must know what they are talking about? However, the statement I have just received shows that on maturity the 10K will only be worth a re-investment value of 11,163.07. If anybody can explain how that figure is arrived at I would be grateful
    • xylophone
    • By xylophone 6th Mar 18, 3:40 PM
    • 26,899 Posts
    • 16,050 Thanks
    xylophone
    • #9
    • 6th Mar 18, 3:40 PM
    • #9
    • 6th Mar 18, 3:40 PM
    I have just received shows that on maturity the 10K will only be worth a re-investment value of 11,163.07. If anybody can explain how that figure is arrived at I would be grateful
    You had tax deducted in year 1?

    Tax not deducted in the two following years.
    • colsten
    • By colsten 6th Mar 18, 4:35 PM
    • 9,328 Posts
    • 8,233 Thanks
    colsten
    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
    further to bowlhead's comments on this; This was known at the time the account was on offer. If it's an issue for you, you'd simply not have taken out the account as nobody was forced to sign up. You're in a lucky position if your income from savings interest is more than 1,000 a year, so I don't think you'll get much sympathy if you had to pay tax on some of yours.
    • kittie
    • By kittie 10th Apr 18, 3:27 PM
    • 12,446 Posts
    • 78,962 Thanks
    kittie
    my elderly friend just found out that he was scammed via false details, he should have had his money back with interest. He lost it all

    There will be many more who won`t realise until this month
    • Geoff_W
    • By Geoff_W 25th Apr 18, 4:49 PM
    • 163 Posts
    • 42 Thanks
    Geoff_W
    My 65+ bond matures shortly. Question: Does HMRC treat all the accrued interest as having been paid in this tax year? If it does, I will exceed my 1,000 allowance (I am a Basic Rate taxpayer).
    • bowlhead99
    • By bowlhead99 25th Apr 18, 5:25 PM
    • 8,283 Posts
    • 15,135 Thanks
    bowlhead99
    My 65+ bond matures shortly. Question: Does HMRC treat all the accrued interest as having been paid in this tax year? If it does, I will exceed my 1,000 allowance (I am a Basic Rate taxpayer).
    Originally posted by Geoff_W
    No, as mentioned in posts #2 and #3, the interest from the first and second years has been earned and made available to you at the end of those first and second years so was treated as having been paid back then. Even though you didn't choose to access that money by paying a penalty for getting the cash out early, you could have done, so they were deemed to be received by you in the earlier years.

    So although you're just about to collect your cash and three years of interest to stride off into the sunset with it as one big lump, the only part of it that's taxable in this tax year is the amount of interest accrued over the last one year on the balance that you had going into this last one year. i.e., one year's interest on [the total of the deposit and year one and year two interest amounts].

    This might be good news for you if the fact that only one year's worth of interest is now becoming taxable, keeps you under your allowance for this year. However, if you didn't know it was going to be, the implication is that you might not have properly included the interest for years one and two in your tax calculations last year and the year before, so best check them if you don't know you're well in the clear.
    • ColdIron
    • By ColdIron 25th Apr 18, 5:27 PM
    • 4,728 Posts
    • 6,187 Thanks
    ColdIron
    As I recall with this product interest is added annually on the anniversary of account opening so is liable for tax in each of those financial years. All you need to worry about when it matures is the interest received in this financial year
    • eskbanker
    • By eskbanker 25th Apr 18, 5:27 PM
    • 8,225 Posts
    • 9,238 Thanks
    eskbanker
    My 65+ bond matures shortly. Question: Does HMRC treat all the accrued interest as having been paid in this tax year?
    Originally posted by Geoff_W
    Answer: See post #3 above!
    • Geoff_W
    • By Geoff_W 29th Apr 18, 10:58 AM
    • 163 Posts
    • 42 Thanks
    Geoff_W
    Thanks for your reply. I thought that the interest was accounted for in each of the 3 years so this will not adversely affect my allowance. The doubt only came about because my wife had a conversation with HMRC about her tax code and, during that conversation, she asked about the tax status of the pensioner bond. The HMRC person thought that all the interest accrued was taxed in the third year, but did refer my wife to the Savings Helpline for the definitive answer (which my OH hasn't yet done).
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