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Pensioner bonds on sale, creating massive demand

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The UK government launched its new pensioner bonds today through the National Savings and Investments.

Early demand was so high the NS&I website struggled to cope with demand with applicants being frustrated by server errors more akin to Glastonbury ticket sales than financial products.

The new pensioner bonds are only available for people aged over 65 who are able to invest up to £20,000 in exchange for bonds which offer between 2.8% for the one year bond and 4% for the three year bond (both before tax).

There was expected to be significant demand for the bonds which provide much better rates of return than most savings plans as well as other bonds, especially given their limited availability.

Their availability comes a day after inflation dropped to just 0.5% which has led to speculation that a rise in interest rates could be delayed yet further, making these bonds even more attractive to people aged 65 or over.

Tax payers will have to pay tax on the interest earned, however non-tax payers will be able to reclaim the tax from HMRC.

The bonds are said to be particularly attractive for those who do not need immediate access to their money and who want a guaranteed rate of interest.

Their availability was announced by George Osborne via his Twitter account this morning.