New pensioner savings bonds paying up to 4% to launch in January

People aged 65 and over will be able to save up to £20,000 at market-beating interest rates from January 2015 under plans for pensioner bonds confirmed by George Osborne.

National Savings and Investments (NS&I) will issue the one-year bonds paying annual interest of 2.8 per cent and three-year bonds which will be paying four per cent, with a maximum deposit of £10,000 each permitted per saver.

The aim of these bonds is to enable older people earn the best interest available on the savings they rely upon after more than five years of having to endure record low Bank of England rates at 0.5 per cent.

Whilst the rates and competitive, experts expressed some misgivings about the bonds. Andrew Hagger, personal finance expert from Moneycomms said; “Pensioners will be disappointed that the bonds don’t pay a monthly income and an even bugbear is that the NS&I Bonds are paid net of basic rate tax and because it isn’t part of the R85 scheme it means that pensioners who don’t pay tax will have to go through the rigmarole of claiming the taxed element back from HMRC.”