National Savings & Investments (NS&I) will be launching two new savings bonds in January aimed at providing a competitive rate of return for pensioners.
The Chancellor George Osborne announced in today’s Budget that NS&I, which is the Government’s funding arm will will have a net financing target of £13 billion in the tax year beginning April 6 2014 which will allow NS&I to launch a “a choice of fixed-rate market leading savings bonds for people aged 65 or over, taxed in line with other savings income”.
NS&I is not run on sales targets like ordinary banks and building societies, but instead is set an annual Net Financing Target by the Treasury which governs how much money it raises each year.
The Net Financing Target is based on a balance of the interests of savers, the wider financial services industry and taxpayers.
Although details will be confirmed in the Autumn Statement, for costing purposes it has been assumed there will be two savings bonds; a one year bond paying 2.8% and a three year bond paying 4%. The maximum deposit limit will be £10,000.
NS&I will allow Premium Bond purchases up to £40,000 – an increase of £10,000 on the current limit from June 1, and increase the number of £1 million prizes from August 2014.
The announcement has been met with very positive comments from the savings industry.
Anna Bowes of SavingsChampion.co.uk said the he proposed pensioner bonds from NS&I may add “some sparkle” to savers’ search for competitive rates.
Kevin Mountford, head of banking at MoneySuperMarket said the introduction of Pensioner Bonds will provide alternative competitive options for older savers who are more likely to require higher returns on their money.
“As always, the devil is in the detail, especially with regards to the transfers options, and we will wait to see what that says,” he added
Peter Smith of not-for-profit association TISA said the new Pensioner Bond and the changes to give pensioners greater freedom in how they drawdown their pension savings will “help to rebuild consumer confidence in a pension as a retirement savings option”.