The government-backed pensioner bonds are getting a three-month extension due to their popularity, expiring just after the general election.
Over-65s now have until 15 May to apply for the bonds, which pay an annual interest rate of 2.8 per cent before tax for a one-year bond and 4 per cent for a three-year bond.
Investments of between £500 and £10,000 can be made into each of the two types of pensioner bond, meaning that a maximum of £20,000 can be invested per person.
National Savings and Investments (NS&I) was offering up to £10bn in bonds, but George Osborne said this figure would be increased to £15bn and the deadline to apply pushed to the week after the general election on 7 May.
Approximately 600,000 people have signed up for the bonds and invested £7.5bn since the scheme launched in January, with more than £1bn sold and 110,000 signed up in the first two days.
Gary Matthews, chartered financial planner at Matrix Capital, said, “A lot of our clients are in their 60s, so it’s nice to be able to present an investment option that creates a higher return than cash deposits elsewhere.
“Overall they are a welcome opportunity. The only potential drawback that I can see would be if the base rate were to increase over the next three years and to what extent that might be. But the bonds are still likely to generate higher returns than other investments.”
Critics say the bonds are a subsidy to pensioners at the expense of the working-age population, as the government is borrowing money more expensively than is necessary.
Mr Osborne estimated the cost of the extension to the taxpayer to be around “several hundreds of millions of pounds.”
The Conservatives have targeted older voters leading up to the election, first with the pension reforms allowing retirees other options besides an annuity, and now the extension to the lucrative pensioner bonds.
