High demand for bonds crashes NS&I website

The new government backed pensioner bonds went on sale today to such high demand that the National Savings and Investments (NS&I) website became overloaded with traffic, and customers became unable to purchase the bonds.

The NS&I then released the following statement, attempting to reassure potential purchasers that the bonds are still available: "We are aware of the current issue with our website affecting some customers. We are working to correct this. We're sorry for the inconvenience this is causing and are grateful to our customers for their patience. We expect the bonds to be on sale for months rather than weeks".

The bonds have attracted so much attention due to their high returns. A one-year bond will pay an annual interest rate of 2.8 per cent, and the three-year bonds will pay 4 per cent.

The "market-beating" rates have been designed to protect pensioners' savings from inflation, and investment in each bond is limited to £10,000 per individual. They are only available to over 65 year-olds.

Patrick Connolly, a certified financial planner at Chase de Vere, commented: "It is likely that demand for pensioner bonds will be huge and so while NS&I expects them to be available for "months rather than weeks" we would still encourage savers to act sooner rather than later.

"However, while these bonds offer market leading rates, they are far from being the cash panacea which some might suggest. These products cannot be held within a tax-free cash ISA and don't pay regular income."

He continued: "A three-year bond paying 4% per annum translates to 3.2% per annum for a basic rate taxpayer, 2.4% for a higher rate tax payer and 2.2% for an additional rate taxpayer. A one-year bond paying 2.8% per annum translates to 2.24% per annum for a basic rate taxpayer, 1.68% for a higher rate tax payer and 1.54% for an additional rate taxpayer."

The cost of living

Connolly believes that the bonds would be of higher value if they could be kept in a cash ISA capable of paying a monthly income, which would help pensions with living costs and expenses.

He added: "Despite these downsides, they do offer stand-out rates and complete security and so we will be advocating pensioner bonds to many of our clients who are able to lock their money away and want to achieve a better return on their cash savings.

Binyamin Ali is assistant editor of Private Client Adviser