Expats Can Benefit From UK Govt’s New Pensioner Bonds

by Ray Clancy on February 17, 2015

As low inflation in the UK pushes an interest rate rise further into the future British expats who are retired are being encouraged to look at other ways of making their savings work for them.

They are a group who have been struggling to get decent returns on their savings but many do not realise that they can qualify for the UK government’s new pensioner bonds.

The 65+ Guaranteed Growth Bonds have been so popular in the UK since their launch on January 15 that the National Savings & Investments (NS&I) website crashed and phone lines were jammed as pensioners rushed to sign up.

Expats can reclaim tax if they are a non-tax payer within their country of residence

The appeal is obvious given that the top rate available on an offshore bond is with Skipton International. The fixed rate bond, which runs until the end of March 2018, pays just 2.2% on deposits above £10,000 and up to £5 million according to data from Moneyfacts.

Experts point out that interest rates for cash savers remain at a historic low, with no expectation of any significant improvement into the future. With the recent move by the European Central Bank to loosen monetary policy and reduce interest rates, there is almost no income available from cash savings for expats for funds outside of the UK.

‘Expats however have been given a lifeline from NS&I with the recent launch of the pensioner bond. If you now no longer live in the UK, you can still qualify for an application for a bond, where up to £10,000 can be invested per individual into the one and three year accounts,’ said Philip Pearson, partner at P&P Invest in Southampton.

‘The interest is paid to you with the return of capital at the end of the investment term. Tax at basic rate is deducted at source and can be reclaimed if you are a non-tax payer within your country of residence,’ he added.

UK Chancellor George Osborne has already announced that the scheme will be extended by three months and an additional £5 billion worth of bonds are likely to be made available. It means one in 10 pensioners will benefit from a total of £15 billion worth of bonds prior to the general election.

An added bonus is that NS&I is backed by the UK Treasury so the investment is very safe. The Bonds are designed to be held for their full term so there is a penalty if they are cashed in before the end of the term. Interest is credited on each anniversary, with basic rate tax taken off.

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