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NS&I (National Savings) 65+ Pensioners Bonds

National Savings Bonds for those over 65 will remain on sale until 15 May. They offer interest rates of 2.8% for 1 year and 4% for 3 years. These headline rates look very attractive but these bonds have certain restrictions.

The age restriction - you have to be an individual (not a Trust) over 65 years old to buy them
Maximum investment - £20,000 per person (ie £10,000 in each of the 1 year and 3 year bonds)
Interest payments - for both 1 and 3 year bonds interest is only paid at maturity - no annual or monthly option is offered
Tax - Tax at 20% will be deducted from interest paid out, but can be reclaimed by non tax payers.
Early encashment - A penalty of 90 days interest is charged on the amount withdrawn, except following death of the investor (bonds can also be passed on by inheritance without charge)
Residence of investor - Apart from US residents investment is open to non UK residents, but UK tax will be deducted at source.