Chancellor George Osborne yesterday revealed that the government will now be offering £15bn worth of controversial so-called pensioner bonds, with an extended application deadline that falls on 15 May – one week after the General Election.
The 65+ guaranteed growth bonds, as they are officially known, offer marketing leading rates, at 2.8 per cent interest over one year or four per cent over three years. Investor demand for the bonds caused the National Savings and Investments (NSI) website to crash hours after they launched on the 15 January, and the chancellor said yesterday that they were “the most successful saving product this country had ever seen”.
Originally NSI was offering up to £10bn in bonds, but this has been increased by £5bn, a move has been met with scepticism in some quarters.
Political expert Mike Smithson, founder of PoliticalBetting.com, said: “Anybody who looks at the age profile of the Tories’ voters would see that they have to keep the pensioners on side,” he stated.
Smithson said the bonds are aimed at the age group “which has seen the most seepage of Conservative voters to Ukip”, which could be of importance in critical, marginal seats. “And this election is not about Labour versus Conservative, it’s about trying to minimise the seepage to Ukip,” he added.
Labour’s shadow Treasury minister Chris Leslie argued that pensioners had suffered under the coalition as a result of the rise in VAT and changes to age-related personal allowances.
“Don’t be surprised if Osborne, as we get closer to an election, tries to give away all sorts of things when, actually, he is trying to erase the memory of how much he has taken away from pensioners,” he commented.
“And he has not said where he is going to get the money for this. What other public services are going to suffer as a result?”
Economist Ros Altmann told City A.M. it was not clear whether there was enough demand for the bonds to warrant increasing the amount available to £15bn. “Most people who would want to invest have probably done so already,” she said.
Altmann also pointed out that the bonds will not benefit elderly people who need a source of income as they will not see returns for three years, and said the scheme was “clearly for the better off pensioners out there”.
Robin Fieth, chief executive at the Building Societies Association, raised objections to the scheme, stating that while banks and building societies were given time to plan for the original £10bn worth of bonds, the 50 per cent extension “has come with no warning”. “It could take a further £5bn out of the real economy,” he added.
Meanwhile, Mark Littlewood, director general at the Institute of Economic Affairs, said: “This announcement well and truly proves that we are not all in it together. Pensioner bonds have never been anything other than a gimmick that will benefit pensioners at the expense of the taxpayer, and it beggars belief that the government is prolonging such a foolish policy. It’s high time our politicians stopped buying votes with subsidies for the old and rich.”