Our Blog page banner

Pensioner bonds: what you need to know

The New Year will see the launch of a new government-backed investment product: the pensioner bond. Here's everything you need to know.

What are they?

Pensioner bonds are government-backed investments administered by National Savings & Investments (NS&I). You will be able to make a lump-sum investment into high-interest bonds for either 1 year or 3 year terms.

You will be expected to remain invested for the length of the term, and a penalty will be levied equivalent to 90 days' interest if you want to cash in early.

What is the rate of return?

The Chancellor promised during the 2014 Autumn Statement that the rate of interest on pensioner bonds would be market-leading and he has not disappointed. Announced in December 2014, the rates are as follows:

  • 1-year bond: 2.80%
  • 3-year bond: 4%

The rates will be fixed for the duration of the term and interest will be compounded each year.

What are the terms of investment?

There are several key terms you will need to meet:

  • You must be aged 65 or over to qualify for pensioner bonds
  • You must invest at least £500
  • You can't invest more than £10,000.

Investors will be able to invest in both 1 and 3 year bonds, increasing the maximum investment limit to £20,000.

When can I invest?

Pensioner bonds will be available to investors from January 2015. A maximum £10 billion will be sold to the market – enough for 1 million over 65s to invest the maximum amount in 1 bond. They'll operate on a first-come first-serve basis and will be available for a limited time only.