What to do when your pensioner bonds mature

Chris Torney / 01 February 2016

The Government's Pensioner Bonds will be coming to the end of their terms soon and thousands of people will have to decide what to do with their money. Here are some of your options.



Thousands of older people who signed up for the Government’s generous “pensioner bonds” around 12 months ago are now facing a choice over what to do with their holdings.

The bonds were introduced by the state-backed National Savings & Investments bank in January 2015 and they offered those aged 65 and above higher levels of interest than was generally available from high-street savings providers.

Seven signs that you need to get on top of your finances.

Lower rates at maturity

NS&I’s one-year 65+ Guaranteed Growth Bonds were issued between 15 January and 15 May last year, so holders will see their bonds mature at some point over the next few weeks and months if they have not done so already.

But after maturity, the original interest rate of 2.8% a year before tax will no longer apply

Savers must therefore choose whether to leave their money invested with NS&I for another 12 months – in which case they will earn 1.45% interest – or withdraw it and seek another home.

NS&I is writing to all bondholders to explain what is happening. 

Savers will have 30 days to make a decision, either by post or online. If no response is made, the money will be automatically rolled over for another year at the 1.45% rate.

What should you do if you get a lump sum of money?

What are your options?

While the original 2.8% interest on one-year pensioner bonds was very attractive – and still is today – the new 1.45% level is not a market-leading rate. 

Other banks, including France’s RCI Bank and Germany’s Fidor Bank, currently offer bonds paying as much as 2%. But remember, bonds such as these mean your money is tied up for a fixed term, and if you need to make any emergency withdrawals, you will be penalised.

On instant-access accounts, on the other hand, the top rates are no higher than 1.65% at the moment.

Read our guide to the tax implications of giving money to your children.

Longer-term bonds

If you are happy to leave your money tied up for a while, you could go for a fixed-rate bond that runs over two, three or five years in order to get higher returns. For example, a two-year bond from Saga currently pays 2.10%, while some five-year bonds pay 3% or more.

For more useful guides and information, browse our money articles.

Tax-free saving

The accounts and rates mentioned above are taxable, so you could end up paying 20%, 40% or even 45% income tax on the interest you get. If you go for a fixed-rate or an instant-access cash ISA, your interest will be free of tax.

But for basic-rate (20%) taxpayers at least, the benefit they will get from avoiding income tax will not offset the fact that the best ISA rates at the moment are considerably lower than those on non-ISA accounts.

What is an ISA?

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.