Blow for savers: Government halves rates on pensioner bonds
RATES on popular pensioners bonds are set to halve from January as the savings reach maturity - leaving older savers once again hunting for income.
Pensioner bonds are maturing from next years
The over 65 savings products were available between January and May 2015 and paid a top 2.8 per cent on cash over a year.
When rates start to come to an end in the New Year, money will automatically transferred to NS&I's Guaranteed Growth Bond with returns of 1.45 per cent over one year.
Savers can also move cash elsewhere, but are going to be hard-pressed to find anything that matches the generous rates previously paid by the pensioner bonds.
However, there are a few options that beat 1.45 per cent, meaning it could be a good idea to move cash.
Where to get the best returns on cash
The best one-year bonds on the market is offered by FirstSave and pays 2.12 per cent.
Another option is Shawbrook Bank, which pays 2.05 per cent on one year bonds.
Get the best returns by moving cash
However, putting cash into a current account can provide the very best returns.
Santander's 123 bank account pays up to three per cent on balance up to £20,000 - although there is an annual fee on the account which rises to £60 from January 2016 that needs to be factored in.
Savers with smaller sums of up to £2,000 could also put their cash in the TSB Classic Plus current account that pays five per cent.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: "Sadly, these customers will now have to battle to find decent returns elsewhere when their bond expires.
“Preparation is key when coming off a fixed rate deal, so when savers receive their one-month maturity notice from NS&I they should start looking for a new place to invest.
"January isn’t far off, so bookmarking the best deals and revisiting the Best Buy charts means that savers will be in the best position to secure another year of decent returns.
"Once they’ve chosen a new account, savers should give NS&I their maturity instructions either online or by post. Phone instructions will not be considered.”