Popular NS&I pensioner bonds axedWhich? highlights the best savings alternatives

15 December 2015

NS&I has axed its popular 'pensioner bonds' 

NS&I has axed its 'pensioner bonds' for the over-65s. Which? Money looks at the best alternative savings deals for bond holders.

Savers who invested in the government's popular pensioner bonds a year ago will face a 49% rate cut if they don't move their money to another account.

The government's shocking move to discontinue the bonds is a huge blow to some 470,000 National Savings customers who invested in the one-year bond.

Customers will receive a letter around 30 days before the bond is due to mature, outlining the following options open to them:

  • Re-invest into a standard Guaranteed Growth Bond.
  • Cash in the bond to re-invest elsewhere.

Savers wishing to re-invest in a standard Guaranteed Growth Bond will earn just 1.45% AER, so it's definitely worth considering an alternative savings option elsewhere.

Which? Money Compare table: Fixed-term savings accounts - compare hundreds of deals

Where next for your savings?

Unfortunately, no bank can match the 2.8% AER pensioner bond rate on comparable deals but there are still good options for your money. The best one-year fix currently available is United Trust Bank's 1 Year Fixed Deposit, paying 2.15% AER. 

Those looking to save with a traditional high street provider will see rates lagging far behind. Barclays, for instance, pays less than half of this at just 1.1% AER.

Disappointingly, to earn a comparable rate to the one-year pensioner bond, you'll need to lock your money away for a longer term. For example, in United Trust Bank's 4 Year Bond at 3% AER.

But if you prefer not to tie up your money for a long time, First Direct's 6% Regular Saver account could be a good option. 

Alternatively, some current accounts are offering eye-catching rates. Santander's 123 Account pays 3% AER on balances between £3,000 and £20,000.

Best cash Isa savings accounts

If you haven't used up your 2015/16 cash Isa allowance the Which? Money Compare tables also compare hundreds of cash Isas, so it's easy to find the highest available rates. 

If you're looking for the best stocks and shares Isa, you can watch our short video explaining what to look for.

Personal savings allowance - new limits

From 6 April 2016, a new personal savings allowance will be introduced. Basic-rate taxpayers will have no tax to pay on the first £1,000 of interest, and higher-rate taxpayers will have no tax to pay on the first £500. However, interest earned above these thresholds will still be taxable.

Find out more: Tax on savings and investments - our guide explains how much tax you'll pay

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