New year means new options for those with savings
AS the year turns, it is inevitably a time when people think about their finances. There will be a review of expenditure over the Christmas period. This might be combined in some households with the need to complete and file the self assessment forms for HM Revenue and Customs, paying income tax by the end of January.
In the UK, we have had a long period of low interest rates, which I know from constituents is really helpful for families with mortgages. It helps businesses using loans to expand their enterprises, too.
The group, however, which has not benefited so much is the people with savings. At his Budget in March 2014, the Chancellor of the Exchequer said he would take action to help the over 65s. These are usually (but not always) pensioners, who use the interest earned from savings to supplement their income from a pension.
The proposal last March was for a ‘pensioner bond’ and the details were released in December, with the bonds being launched in January 2015.
People who are aged 65 or over can invest in the bonds, which will pay higher interest rates. These are 2.8 per cent for a one year bond and four per cent for a three year bond. Individuals can invest £10,000 in each type of bond, thus investing up to £20,000 at these higher rates.
Tax will be payable on the interest (including higher rate tax for individuals in that income bracket), but people who do not pay any tax will be able to reclaim the tax paid. This will give people with savings more options, as the amount which they can save using ISAs (individual savings accounts) has also been increased.
I have been very aware that constituents who rely on income from their savings have felt that they were shouldering their own burden during the efforts to reduce debt and help the UK economy to grow, so I hope some over 65s will be able to take up this new option for saving.