The scheme, which launched in January, had originally been capped at £10bn worth of funds. But, due to their overwhelming popularity which sent NS&I's phonelines and website into meltdown, it was extended to Friday, May 15 - a date which is now fast approaching. Our Q&A has everything you need to know...
Q. Exactly when is the deadline for applications?
A. Applications online and by telephone (0500 007 007) must be made before 23.59 on Friday, May 15. Postal applications must also be received by then or will not be processed.
Q. What rate of interest do the bonds pay?
A. The one-year Pensioner Bond pays 2.8% and the three-year bond pays 4%, both before tax.
Q. How much can I invest in Pensioner Bonds?
A. The minimum amount you can invest in a Pensioner Bond is £500, while a maximum of £10,000 can be saved in EACH bond. So if you take out both the one-year and the three-year version, you will be able to invest a total of £20,000. Couples can therefore invest a maximum of £40,000 between them.
Q. Can I top up once I have invested?
A. Savers were able to top up to the limit after their initial investment, so long as the particular bond was still for sale. Now the bonds will be closing on May 15, the amount you open it with will be the amount you can hold in the bond until its respective maturity date.
Q. Are the rates tax-free?
A. No, unfortunately not. And Pensioner Bonds cannot be held in an individual savings account (ISA) either. A one-year bond paying 2.8% translates to 2.24% a year for a basic rate taxpayer, 1.68% for a higher rate taxpayer and 1.54% for an additional rate taxpayer. A three-year bond paying 4% translates to 3.2% a year for a basic rate taxpayer, 2.40% for a higher rate taxpayer and 2.20% for an additional rate taxpayer.
Even if you are a non-tax-payer, you will still have 20% tax taken from the interest paid by Pensioner Bonds. You’ll then have to claim this tax back from HMRC via self-assessment tax returns. This is also how you will have to pay the extra tax if you are a higher or additional rate taxpayer.
...Telephone and online applications for Pensioner Bonds must be made before 23.59 on May 15...
Q. Are the rates market-leading?
A. Yes! They were when they launched and they still are. As a comparison, for the same initial £500 investment, over 12 months, the market-leader is UK-based Bank of Baroda which pays 1.70%. Or if you prefer a more familiar brand, the Post Office pays 1.66% over a year. Over three years, Bank of Baroda comes out top again at 2.30%, while United Trust Bank pays 2.15%.
Q. When is interest on Pensioner Bonds paid?
A. You won’t receive any interest from your Pensioner Bond until the respective accounts mature. There’s no monthly interest or even annual interest option available. So if you’re looking to supplement your regular income, these accounts might not be right for you.
Q. What if I need to cash my bond in early?
A. You can access on your cash before the chosen term is up, but you will be charged a penalty equivalent to 90 days’ interest. However, it's worth knowing that, if you take the three-year bond and cash it in after a year, you won't lose out financially (ie, you'll still earn a rate of 3% once this cost has been factored in).
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.