National Savings Bonds: Pensioners

(asked on 17th March 2015) - View Source

Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, for what reasons Pensioner Bonds are not included in the Tax Deduction Scheme for Interest.


Answered by
Andrea Leadsom Portrait
Andrea Leadsom
Parliamentary Under-Secretary (Department of Health and Social Care)
This question was answered on 25th March 2015

At Budget 2015, the Chancellor announced that from April 6th 2016, a new savings allowance will remove 95% of people from savings income tax. As a result the industry is expected to switch off the Tax Deduction Scheme for Interest (TDSI), and NS&I plan to start paying interest gross on all taxable products, including the 65+ “Pensioner” Bond.

The Bonds are not included in TDSI as NS&I as a whole does not operate TDSI. Instead NS&I decide on a product-by-product basis as to whether taxable products should be paid net or gross of basic rate tax. At the time 65+ bonds were being developed, the majority of pensioners were basic rate tax payers, and therefore liable to be taxed at the basic rate on the interest on their savings. Paying interest net of the basic rate on 65+ bonds meant that the majority of customers would be taxed correctly without the need to intervene.

When TDSI was implemented in 1991, it was decided that it was not appropriate or cost-effective for NS&I. The option to join was kept under review, but as 72% of NS&I’s total stock is invested in tax-free products, and a large proportion of NS&I customers are not liable to pay tax on the remaining taxable products, it is considered to be prohibitively expensive to the taxpayer for NS&I to join the scheme.

Reticulating Splines