Pensioner bonds limit is scrapped as 600,000 savers grab market-beating rates: We reveal what you need to know about the new deadline

  • Over-65s have until 15 May to deposit their cash
  • Three-quarters of original £10bn allocation taken in little over three weeks 

By Lee Boyce for Thisismoney.co.uk

Published: 06:19 EST, 9 February 2015 | Updated: 08:06 EST, 9 February 2015

Chancellor George Osborne has scrapped the cap on market-beating pensioner bonds and has given over-65s until 15 May to deposit their cash.

The Government extended availability of the accounts – officially known as 65+ Guaranteed Growth Bonds – after more than 610,000 savers invested £7.5billion into the bonds which come in two versions -  one paying 4 per cent over three years and another 2.8 per cent over one, 

The original capacity of £10billion has now been removed altogether and Mr Osborne has set a 15 May 2015 deadline for the over-65s to open them.

Change of tune: George Osborne has now set a 15 May deadline for opening the pensioner bonds, rather than setting a cap of £10bn to be allowed to pour in

Change of tune: George Osborne has now set a 15 May deadline for opening the pensioner bonds, rather than setting a cap of £10bn to be allowed to pour in

How much can savers put in?

There is a maximum limit of £10,000 per person, per each version of the bonds - a total of £20,000, or £40,000 per couple.

Crunching the numbers, it means the average saver has stuck £12,300 into the bonds so far.

The Government estimates that the total held in pensioner bonds will climb to £15billion. 

After the application process was hit by a stream of problems, This is Money pressured NS&I to reveal how much had been put into the bonds, but it would not reveal the answer.

It has now emerged that £7.5billion worth have been taken out, meaning three-quarters of the original allocation has been snapped up.

That comes in contrast to Mr Osborne's forecast on 19 January that the bonds would be available for months.

Why has this caused chaos at NS&I?

Returns are so attractive that National Savings & Investments, which runs the bonds, has struggled to process applications. 

The NS&I website crashed for several days after the launch and postal applications have been delayed.

This is Money readers have reported having duplicate payments taken, or being left waiting as their postal applications are processed.

Last week, NS&I told us 730 additional members of staff have been drafted in to work on the bonds, including around 430 in 'back office' roles.

It said: 'We are implementing a number of measures to ensure customers who post applications are aware of the status of their transaction including outbound calls, texts and emails confirming receipt and likely timescales.'

Savers have been starved of decent returns in the last few years. On top of almost six years of 0.5 per cent Bank of England rates, the Funding for Lending scheme has enabled banks and building societies to borrow cheap money from the Government, reducing the need to entice savers with attractive rates.

One in ten pensioners are now expected to take out one of the 65+ bonds - there are estimated to be 11million people in the UK aged 65 or over.

Anna Bowes, director at independent advice website Savings Champion, said: 'It's no surprise these bonds have been hugely successful but it was a surprise NS&I didn't predict this. With rates way over and above the nearest competition, the bonds were always going to fly off the shelf. 

AN EXTENSION TO HIDE THE CHANCELLOR'S BLUSHES?

On 19 January, four days after launch, This is Money crunched the numbers to reveal that if pensioner bonds continue to sell at the same speed they would be gone by the start of February.

NS&I has now revealed £7.5billion has already poured in - three-quarters of the original allocation.

Soon after launch, Osborne hailed the bonds a success at that time and said they 'would be on sale for months.'

It seems an extension to the scheme was necessary to allow the Chancellor to fulfill his pledge. 

Anna Bowes said: 'Sceptics may suggest the timing is apt and that the extension is needed given Osborne’s statement that they expected the bonds to be available for months.'

'That said it's great news that they have been extended so more savers can take advantage, especially those who will turn 65 within the next three months. 

'More needs to be done to support suffering savers that are under 65 and unable to table advantage. Unfortunately the bank and building societies have not responded by offering better rates themselves, so the lack of competition in the market continues to blight savers.'

The cost of extending the scheme will be borne by the taxpayer. 

Why has George Osborne raised the cap? 

The removal of the cap has seen Osborne accused of 'buying votes' for the Conservative Party in the run-up to the General Election in May.  

Critics have accused Osborne of electioneering and said the initial £325million bill to subsidise the above-market-rate interest would now rise.

But the Chancellor insisted he was lifting the cap on the products to encourage more people to save.

He said: 'I want to ensure as many older savers as possible can take advantage of these market-leading bonds, which is why I'm confirming today that potential savers will have months to invest in these hugely popular products, if they wish. It's part of our long-term economic plan to support savers.

'Our 65-plus pensioner bond has been the most successful savings product this country has ever seen. What I can confirm today is that we are going to guarantee that it remains on sale for another three months.'

More than £1billion of bonds were sold to 110,000 pensioners in just the first two days after they went on sale.

 

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