More than a million older savers have bought over £13bn of the government’s 65+ pensioner bonds, which came off sale on the weekend.
These sales figures means that the bonds have been the biggest selling retail financial product in Britain’s modern history.
With annual interest rates of 4 per cent for the three-year bonds and 2.8 per cent for the one-year bonds, they offered savers the best available rates in the market, although some criticised them for targeting older voters in the months leading up to an election.
Upon their announcement in December, industry figures also pointed out that while the interest rates are high, they did not offer a monthly interest option for those who want to supplement their income and there was a danger that the bonds will become over-subscribed.
This quickly became the case, with pensioners buying £1.1bn of bonds - a total of 110,000 sales - within two days of the January 15 launch of NS&I’s new product.
Chris Williams, chief executive of online investment advisor Wealth Horizon, previously pointed out that the bonds are not the only way to outpace rates offered by banks and building societies.
“Indeed, while the rate might grab the headlines, paying into a long term investment strategy and building on its compound interest is likely to be a lot more profitable in the long run.
“However, there is a sting in the tail of these bonds that people need to be aware of. Those who take out the bond will have to pay tax annually on the interest accrued each year, but the bond itself will only pay out at the end of the term.
He added: “This means that higher rate tax payers will need to find this money from their own pockets in the first instance or have it deducted from their pension income.”
Chancellor George Osborne hailed them as a huge success, stating: “They’re now helping over a million older savers who have done the right thing, by boosting the return on their savings and securing a more comfortable financial future.”
The government had originally allocated £10bn for the bonds. However, in February Mr Osborne announced that they would be on sale for four months, until 15 May 2015.