Innovative thinking could have made Pensioner Bonds even better

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16 February 2015: Pensioner Bonds have been incredibly popular with the over-65s since they went on sale in January, paying an interest rate above the market average for people happy to tie up their money for a year or more and who do not require a source of monthly income. In fact they have proven so successful, despite a few IT glitches, that the Chancellor has just extended the period they are available to May 15th and increased the amount to £15bn.

This is great news for pensioners who are arguably more reliant than most on the growth their savings generate and therefore have been impacted more by the low interest rate environment. After all, this was one of the main reasons Nationwide campaigned for changes to the ISA rules last year, to give older people more flexibility in the way they manage their savings and investments.

It’s something of a shame that the Government didn’t consider using the Mutual Sector as the vehicle for providing Pensioner Bonds

However, it’s something of a shame that the Government didn’t consider using the Mutual Sector as the vehicle for providing Pensioner Bonds to the public. Of course the mutual sector would have to work closely with Government to develop a way of offering these kinds of bonds, but by only offering them through National Savings & Investments the money invested in these bonds is taken out of circulation. Had the bonds been offered by Buildings Societies, for example, the money invested could have been recycled and used to fund mortgages.

It would have been a win-win for pensioners and homebuyers alike.

So whilst I applaud this initiative and its aim of giving the over-65s a boost in their savings, I would urge a little more innovative thinking in the way future schemes are set up, bringing benefits to even more people and the wider economy.