Synopsis: National Savings & Investments have announced the terms for reinvestment of the 65+ Guaranteed bonds. You can tell there is no election in the offing.
In October 2015 National Savings & Investments (NS&I) announced small increases in rates for its Guaranteed Growth Bonds (GGBs). These are only available to existing investors whose bonds reach maturity: they are not on public sale. In the Bulletin we issued at the time, we commented that NS&I’s more interesting reinvestment rate decision would be in the context of 2016’s maturing 65+ Guaranteed Bonds. The one-year issue of these, which is currently paying 2.8%, starts to mature in January.
NS&I have now revealed the reinvestment answer and it is going to disappoint many pensioners. The choice will be between:
· taking the maturity money (with interest taxed at 20% in 2015/16, but paid gross for maturities from 6 April 2016); and/or (mix and match is possible)
· reinvesting in any term(s) of GGBs. There are no special 65+ rates. As a reminder the current GGB rates are:
Term 1 Year 2 Years 3 Years 5 Years
Rate 1.45% 1.70% 1.90% 2.55%
As we remarked in October, none of these rates are anything close to table topping – most are at least 0.5% adrift. For example, at the time of writing the best one-year rate was 2.15%. On the other hand, the gilts market says the government can borrow for one year at about 0.65% and five years at about 1.4%, making the GGBs a relatively costly source of finance.
Surprisingly, only the Guaranteed Growth Bond is on offer, although elsewhere NS&I also offer Guaranteed Income Bonds (GIBs) for maturity reinvestment. GIBs have marginally lower rates, but provide a monthly income whereas the GGBs roll up all interest until maturity.
COMMENT
These reinvestment terms tend to confirm what many commentators said when the 65+ bonds were originally launched: they were a taxpayer-financed election incentive for a slice of the population that turns up at polling stations.
Perhaps this money could be used for your ISA allowance and thus enjoying a more tax efficient environment. In addition the ISA rules now allow a surviving spouse/civil partner to enjoy an additional ISA allowance equal to the ISA value of their deceased partner.
Why not talk to the professionals about properly managing your finances
Call us on 01273 457100
020 7871 5387
01403 333666
Or email us on info@opusgold.com
Or just take a look at how we help our clients www.opusgold.com