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News0 min ago
5.8% Pensioner Bonds
5 Answers
Published 6 hours ago is a statement by Richard Dyson of The Daily Telegraph that it is now possible to buy 5.8% Pensioner Bonds.
I am 83 years old and I should like to know 3 things:-
1. Do I qualify?
2. Where can I buy them?
3. What is the maximum and minimum holding?
Any advice on this matter would be greatly appreciated.
I am 83 years old and I should like to know 3 things:-
1. Do I qualify?
2. Where can I buy them?
3. What is the maximum and minimum holding?
Any advice on this matter would be greatly appreciated.
Answers
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Is this what you refer to?
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In effect you would paying money in to the state pension to get a higher weekly rate. Topping up your pension. You can't ever withdraw it and when you die your spouse gets 50% of the top up. If you don't live very long after paying in and have no spouse that is an extremely bad investment.
It is really only suitable for somebody who has just reached the qualifying age, in extremely good health with a much younger spouse.
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In effect you would paying money in to the state pension to get a higher weekly rate. Topping up your pension. You can't ever withdraw it and when you die your spouse gets 50% of the top up. If you don't live very long after paying in and have no spouse that is an extremely bad investment.
It is really only suitable for somebody who has just reached the qualifying age, in extremely good health with a much younger spouse.
And even then it is not a particularly good deal.
Sorry but I do not share Mr Dyson’s enthusiasm for this scheme and I believe the article is misleading.
Firstly, the article suggests a “return” of 5.8%. This is not true. In exchange for parting with your £22,250 you get 5.8% of it back each year (slightly more when adjusted for inflation) but your £22k is forfeit. It is not the same as receiving 5.8% return on an investment where the capital remains intact. The only real return you are getting on your funds is an increase of 2.5% per annum on the initial £25 per week. That is 2.5% on £1,300. This amounts to about £32 per annum or around 0.14% on your £22k.
So what does it do? If you part with £22,250 to get an inflation-proof £25 per week, assuming the “Triple Lock” is still operative and the State Pension rises by a minimum of 2.5% per annum, it will take just about 15 years to recoup your outlay. You will have received your £22,250 back at £25 per week, but you will have nothing in the bank. Furthermore, there is a considerable loss if you die before then. For each year less than fifteen that you draw your extra pension you lose about £1,300, or half that if you leave a surviving spouse. On the plus side is that the additional pension is paid if you survive longer than 15 years.
If you keep your money in the bank and invest it at 2% (which you can get even in these hard times) you can still draw your £25 per week (increased by 2.5% each year) and it will last you a little longer at about 16 years. But the big advantage of this is that there is no risk to your cash should you die early. Whenever you die all that you have not spent still remains for you to bequeath as you wish. Of course on the minus side of this plan is that once your cash runs out it is gone so if you survive more than 16 years there’s nothing left.
This deal may be a good one when compared to “annuity rates” (which are notoriously bad). But most people would be better off (and certainly have greater flexibility) to hold on to their cash and draw it as they wish. Furthermore Mr Dyson’s article is headed “Pensioner bonds are gone, but there’s another state-backed deal paying 5.8pc” suggesting that the two things are comparable when they certainly are not.
Sorry but I do not share Mr Dyson’s enthusiasm for this scheme and I believe the article is misleading.
Firstly, the article suggests a “return” of 5.8%. This is not true. In exchange for parting with your £22,250 you get 5.8% of it back each year (slightly more when adjusted for inflation) but your £22k is forfeit. It is not the same as receiving 5.8% return on an investment where the capital remains intact. The only real return you are getting on your funds is an increase of 2.5% per annum on the initial £25 per week. That is 2.5% on £1,300. This amounts to about £32 per annum or around 0.14% on your £22k.
So what does it do? If you part with £22,250 to get an inflation-proof £25 per week, assuming the “Triple Lock” is still operative and the State Pension rises by a minimum of 2.5% per annum, it will take just about 15 years to recoup your outlay. You will have received your £22,250 back at £25 per week, but you will have nothing in the bank. Furthermore, there is a considerable loss if you die before then. For each year less than fifteen that you draw your extra pension you lose about £1,300, or half that if you leave a surviving spouse. On the plus side is that the additional pension is paid if you survive longer than 15 years.
If you keep your money in the bank and invest it at 2% (which you can get even in these hard times) you can still draw your £25 per week (increased by 2.5% each year) and it will last you a little longer at about 16 years. But the big advantage of this is that there is no risk to your cash should you die early. Whenever you die all that you have not spent still remains for you to bequeath as you wish. Of course on the minus side of this plan is that once your cash runs out it is gone so if you survive more than 16 years there’s nothing left.
This deal may be a good one when compared to “annuity rates” (which are notoriously bad). But most people would be better off (and certainly have greater flexibility) to hold on to their cash and draw it as they wish. Furthermore Mr Dyson’s article is headed “Pensioner bonds are gone, but there’s another state-backed deal paying 5.8pc” suggesting that the two things are comparable when they certainly are not.
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