Website crashes due to demand
Osborne hails pensioner bonds amid concerns
He said 26,000 bonds had been sold worth £270 million.
“With £10 billion on offer, will be available for many weeks,” he said on his Twitter account.
However, such was the deman that the government website crashed and there were concerns that the floodgates are opening on retirees and pensioners making ill-advised decisions in pursuit of attractive rates of interest.
By offering 4% if the bond is invested for three years the pensioner bond yields a better rate than many rival products.
But there are concerns it will divert savings from buildings societies and banks which depend on deposits to fund loans. It may lead to a tightening in the mortgage market.
Calum Bennie, savings expert at Scottish Friendly, said: “It’s all very well the NS&I telling people not to ‘rush’ to get the new Government bonds, but with superior rates to anything else that you will find on cash deposits on the high street, you don’t have time to sit around and twiddle your thumbs.
“By nine o’clock this morning the website selling the bonds had already reported problems under the weight of demand.
“There is £10bn set aside for this tranche of bonds, so we are not likely to see it sell out in days. However, there is only a very slim chance that they will still be available by March. For those savers that are unable to get their hands on a bond before they disappear, there are still a number of options out there, including tax-free investment ISAs.
“Whether or not successful in getting one of these Government bonds, savers should still be reviewing their current savings strategy in the run up to the end of the tax year. People should question their current strategy for saving and if they are getting a low rate, then it’s time for them to make a change.
“Anyone thinking of taking out a pensioner bond by cashing in an existing ISA needs to bear in mind that will then lose the tax-free status of their savings.”
Chris Williams, chief executive of Wealth Horizon, said: “While the government might be trying to prevent a stampede, record low interest rates in the UK mean that these bonds are likely to be here today, gone tomorrow. Even in the early hours of the release of the bond, the NS&I website struggled to meet the demand of tech savvy pensioners keen to take advantage of the Government’s generosity.
“The bonds are market-leading but it may well be the case that just half a million of the eligible 11 million retirees in the country will actually be able to lay their hands on one before they sell out.
“Yet, those pensioners that are not so quick out of the starting blocks and miss out on the bonds should not simply rest on their laurels.
“There are so many options out there for retirees who miss out, including building a lower-risk portfolio of different assets which can potentially deliver the income they need in retirement, while also providing them with a chance to make capital gains.”
See Alan Steel in Comment