A pensioner bond offering rates of up to 4% interest is set to be extended for a further 3 months. The Chancellor of the Exchequer, George Osborne, announced that the deadline for over 65ís to apply to the scheme would be moved back until May 2015 because the scheme has been ìenormously popular and successful.î
After two days of the scheme being introduced more than £1 billion worth of bonds were sold. The number of people who have signed up to it has now reached 600,000.
The National Savings and Investments have had the capacity to give up to £10 billion in bonds until this recent announcement. However, under the new plan, Mr. Osborne has stated his expectancy for this figure to rise to £15 billion. Moreover, the deadline will now reach beyond the upcoming general election with the revised date being the 15 May 2015.
Mr Osborne said of the scheme, it is ìthe most successful saving product this country has ever seenî and that the government ìÖwill guarantee that it remains on sale for a further three months because this government backs savers and supports people who do the right thing.î
He went on to say: ì I want to ensure as many older savers as possible can take advantage of these market-leading bonds, which is why Iím confirming today that potential savers will have months to invest in these hugely popular products.î
The announcement has been met with criticism by political opponents who accuse Mr. Osborne and the Conservative party of electioneering and attempting to buy the elderly vote. They argue that the original £325 million cost to subsidise the above-market-rate interest on this scheme would now rise and this additional cost will fall on the working age population to cover.
The bond is available to all those over the age of 65 who have a minimum of £500 to invest. Under the scheme a one-year bond gives the investor a 2.8% annual interest rate before tax, with a three-year contract rising to 4% before tax.
The investment is constrained to £10,000 for each bond, which gives a maximum of £20,000 per individual and £40,000 for a couple. The interest is given on each anniversary after the initial investment.
Chris Leslie, the shadow Treasury minister has warned citizens against being misdirected by Mr. Osborne who has actually overseen a painful period for pensioners under this coalition government.
He stated: ìDonít be surprised if George Osborne, as we get closer an election tries to give away all sort of things when, actually he is trying to erase the memory of how much he has taken away from pensioners.î Mr. Leslie is referring to the increase in VAT and the negative effects of changes that have been made by the government to personal allowances based on age.
He went on to argue: ìAnd he has not said where he is going to get the money for this. What other public services are going to suffer as a result?î
Mark Littlewood, director general of the Institute for Economic Affairs, echoed the cynicism of Mr. Leslie. He moved to alert the public to the damage this scheme would do for the average worker in this country.
He stated: ìThis announcement well and truly proves that we are not all in it together. Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthy pensioners from the working-age population.î
Furthermore, he said: ìPensioner bonds have never been anything other than a gimmick that will benefit pensioners at the expense of the taxpayer, and it beggars belief that the government is prolonging such a foolish policy.î
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