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| Pensioner bonds to offer returns of 2.8% and 4% | Pensioner bonds to offer returns of 2.8% and 4% |
| (35 minutes later) | |
| New pensioner bonds are to carry market-leading interest rates, the government has announced. | New pensioner bonds are to carry market-leading interest rates, the government has announced. |
| The one-year bond will pay an annual interest rate of 2.8%, and the three-year bonds will pay 4%. | The one-year bond will pay an annual interest rate of 2.8%, and the three-year bonds will pay 4%. |
| Only those aged 65 and over are eligible to invest in the bonds, which are scheduled to be launched in January. | Only those aged 65 and over are eligible to invest in the bonds, which are scheduled to be launched in January. |
| Investment will be limited to £10,000 in each bond, making a maximum of £20,000 per individual. | Investment will be limited to £10,000 in each bond, making a maximum of £20,000 per individual. |
| Even though savings rates have fallen since plans for the bonds were announced in March, the Treasury has kept to the rates it predicted at the time. | Even though savings rates have fallen since plans for the bonds were announced in March, the Treasury has kept to the rates it predicted at the time. |
| "These are absolutely market-beating rates, and I expect them to fly off the shelves," said Danny Cox of Hargreaves Lansdown. | "These are absolutely market-beating rates, and I expect them to fly off the shelves," said Danny Cox of Hargreaves Lansdown. |
| Those investing the maximum allowed will get a return of £280 on their one-year bond before tax, £95 more than they could get from the best equivalent bond currently available. | Those investing the maximum allowed will get a return of £280 on their one-year bond before tax, £95 more than they could get from the best equivalent bond currently available. |
| Pensioners investing the maximum £10,000 in a three-year bond will earn £1248 before tax, £480 more than they could get elsewhere. | Pensioners investing the maximum £10,000 in a three-year bond will earn £1248 before tax, £480 more than they could get elsewhere. |
| Tax | Tax |
| However, investors will be subject to tax on the earnings from their bonds, reducing the headline gains. | However, investors will be subject to tax on the earnings from their bonds, reducing the headline gains. |
| For those paying basic rate tax, 20% will be deducted from the interest they earn, reducing the return on a one-year bond to £224, and on a three-year bond to £991. | For those paying basic rate tax, 20% will be deducted from the interest they earn, reducing the return on a one-year bond to £224, and on a three-year bond to £991. |
| Higher rate tax payers will need to pay extra. | Higher rate tax payers will need to pay extra. |
| The interest on both bonds will only be payable at the end of the term, and anyone wanting to take their money out early will lose 90 days interest. | The interest on both bonds will only be payable at the end of the term, and anyone wanting to take their money out early will lose 90 days interest. |
| However, non-taxpayers will be able to reclaim their tax through an R40 form, available from National Savings and Investments. | However, non-taxpayers will be able to reclaim their tax through an R40 form, available from National Savings and Investments. |
| Even allowing for the fact that the returns will be taxable, they still offer better rates than cash Individual Savings Accounts (Isas), which are tax-free. | Even allowing for the fact that the returns will be taxable, they still offer better rates than cash Individual Savings Accounts (Isas), which are tax-free. |
| The best one-year Isa offers a return of 1.75%, and the best three-year account offers 2.15%. | The best one-year Isa offers a return of 1.75%, and the best three-year account offers 2.15%. |
| The government has limited the issue to £10bn, and expects one million pensioners to buy them. | The government has limited the issue to £10bn, and expects one million pensioners to buy them. |
| They will be sold on a first-come, first-served, basis, so it is likely that many pensioners will be disappointed. | They will be sold on a first-come, first-served, basis, so it is likely that many pensioners will be disappointed. |
| "The rates are very competitive, so that's why I expect them to be oversubscribed," said David Braithwaite of Citrus Financial. | "The rates are very competitive, so that's why I expect them to be oversubscribed," said David Braithwaite of Citrus Financial. |
| The minimum investment will be £500, and the bonds will be available by post, by phone, or online. | The minimum investment will be £500, and the bonds will be available by post, by phone, or online. |
| No date has yet been given for when people can apply, but more information is available from the NS&I website. |