Pensioner bonds sale 'hugely successful' - Osborne

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Media captionPension bond have become the fastest-selling financial product, as Joe Lynam reports

More than £1 billion of government pensioner bonds have been sold in the first two days after they went on sale.

Chancellor George Osborne said it was "the biggest opening sales of any retail financial product in Britain's modern history" after more than 110,000 pensioners bought the bonds.

Up to £10bn of bonds are being made available through National Savings and Investments (NS&I).

They pay an annual interest rate of up to 4% for over 65s.

As of Saturday morning, £1.15bn of the bonds had been sold.

'Rewarding savers'

There were some problems on the NS&I website and its phone lines due to high demand when the bonds initially went on sale. They are also available by post.

Mr Osborne said the success of the scheme "shows what an appetite there is for an economic plan that rewards savers".

He said: "Our economic plan involves supporting savers and I'm delighted to report that it is proving hugely popular.

"I can confirm that the latest figures, available this morning, show that our 65+ Pensioner Bond has had the biggest opening sales of any retail financial product in Britain's modern history."

He said he expects them to be on sale "for months" and tweeted that there were "plenty left" of the "hugely successful" product.

The TaxPayers' Alliance has described the bonds as a "bad idea", however.

Image copyright EPA
Image caption The chancellor announced the creation of the bonds last year

Campaigns director Andy Silvester said: "They're not only taxpayer-guaranteed investments for the already relatively well-off, but leave the government borrowing at above-market rates.

"Too often during this Parliament it has seemed as if austerity stops at 65 - it's almost as if pensioners are more likely to vote."

The one-year bond pays an annual interest rate of 2.8% before tax, and the three-year bonds pays 4% before tax. Interest will be added on each anniversary after investment.

Financial advisers have pointed out that the best one-year bond on the open market was currently paying 1.85% interest and the best three-year bond was paying 2.5%.

Tax will be deducted from the interest paid on these bonds, however non-taxpayers can claim this back from HM Revenue and Customs (HMRC).

Basic rate taxpayers must declare the interest if they complete a tax return. Higher and additional rate taxpayers need to declare the interest to HMRC and pay any further tax due.

Investment is limited to £10,000 in each bond, making a maximum of £20,000 per individual.

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