You are here: Home - Saving & Banking - News -

Will maturing pensioner bond holders be caught by inertia?

Written by:
The final pensioner bonds mature next week, marking the end of one of the most popular financial products in history.

NS&I’s 65+ Guaranteed Growth Bonds were launched between January and May 2015. A three-year bond paid interest at 4%, set against interest rates of 0.5%, and were bought by 885,000 people.

They have proved a good choice for savers and were one of the few savings accounts outstripping inflation. However, the ‘rollover’ offering is far lower, at 2.2%. This is still competitive. The top-selling three-year fixed term savings account (from RCI Bank) is paying 2.3% (source: Savings Champion), but investors may want to hunt around for a better option.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “There’s nothing innately wrong with letting the bond roll over; 2.2% over three years isn’t a horribly uncompetitive rate.

“However, if savers are going to make the right decision, they cannot let inertia be the driving force in their savings strategy, because inertia can do as much damage to your savings as it can to your ambitions to get up early and go for a run.

“Savers need to avoid taking the path of least resistance, and focus instead on RATE: Rate, Access, Time and Effectiveness.”

In terms of rates, the rollover bond doesn’t compare unfavourably, but savers should consider whether they want to tie their money up for another three years. Coles said there are some easy access accounts that offer only a limited number of withdrawals in return for a higher rate.

She added that rather than seeing the pot of cash as a single sum of money, savers should consider dividing it up and take a portfolio approach. With this approach, the cash may be spread across short and long-term fixed rates, or even stock market investments.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

Coronavirus and your finances: what help can you get in the second lockdown?

News and updates on everything to do with coronavirus and your personal finances.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Couple with steepled fingers over piggy bank
Over forties renters almost double in a decade

The number of people still renting in their forties has almost doubled over the past decade.