February 9, 201511 yr The “Pensioner Bonds” launched recently by George Osborne, which pay up to 4% pa to the holder, have proved so popular that up to £15bn worth of the bonds are now expected to be issued, rather than the £10bn originally planned. There is, however, a degree of controversy over these bonds as in order to offer such a good rate of interest the bonds are being subsidised by the UK taxpayer. There have been no complaints, though, from the estimated 600,000 registered voters (sorry, pensioners) who have so far subscribed to the bonds.
February 9, 201511 yr They only pay 4% if they can afford to lock the money away for three years and any interest is taxed at 20%. The only reason they look attractive is that savings rates have been at rock bottom for the last five years.
February 9, 201511 yr The only reason they look attractive is because they are. I'd love to lock my money up at that rate.
February 9, 201511 yr Or you could just stick your money in a Santander 123 current account at 3% interest and not have to lock it away at all.
February 9, 201511 yr Also, I wouldn't like to risk over £50,000 in a single bank for obvious reasons.
February 9, 201511 yr Also, I wouldn't like to risk over £50,000 in a single bank for obvious reasons. Why £50,000?
February 9, 201511 yr I see the maximum you can put into a pension bond is £20,000, so I'd go with the Santander account!
February 9, 201511 yr The rate effectively drops to 1.8% on 20k once you take into account the monthly fee. Plus you need to pay in £500 per month. It's not an investment vehicle.
February 9, 201511 yr The rate effectively drops to 1.8% on 20k once you take into account the monthly fee. Plus you need to pay in £500 per month. It's not an investment vehicle. It's not designed to be an investment vehicle but if you don't want to lock your cash away for three years, it's a useful compromise. If you've got £20K to invest and you don't need instant access, you'd be better off investing it in a equity ISA. After three years it'll almost certainly be worth more than some bond paying 4% before tax. You'll also be able to access it if you need the cash and any profits are tax free. You can even take any income from any dividends as cash to supplement your income.
February 9, 201511 yr It's not designed to be an investment vehicle but if you don't want to lock your cash away for three years, it's a useful compromise. If you've got £20K to invest and you don't need instant access, you'd be better off investing it in a equity ISA. After three years it'll almost certainly be worth more than some bond paying 4% before tax. You'll also be able to access it if you need the cash and any profits are tax free. You can even take any income from any dividends as cash to supplement your income. Hmm, there are plenty of periods in history where three yes in equity wouldn't achieve a return of 4%pa. I'd want a much longer time period than three years to be saying almost certainly.
February 9, 201511 yr Hmm, there are plenty of periods in history where three yes in equity wouldn't achieve a return of 4%pa. I'd want a much longer time period than three years to be saying almost certainly. The bonds don't return 4% per annum, they pay 4% minus the tax when the bond matures in 3 years time.
February 9, 201511 yr The bonds don't return 4% per annum, they pay 4% minus the tax when the bond matures in 3 years time. I don't dispute that but with equity they could lose 10% over three years. Not sure pensioners should be investing there unless they don't expect to need that capital for ten to fifteen years, it would be a risk.
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