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It pays to vote

NS&I’s 65+ bonds went on sale in January and have been the biggest selling retail financial product in modern history. More than a million savers have bought over £13bn of market-leading pensioner bonds.

No surprise, really, considering the rates of interest being paid (particularly if the return is “risk adjusted”)

George Osborne hailed the bonds as “a huge success”. We don’t know what criteria he was using to judge them as a success but I am guessing “they got me re-elected” was the main one.

Not being one of the over 65s, I don’t consider the bonds to be any sort of success at all.

Chancellor George has effectively borrowed a load of money for a year, at a rate of 2.8%, and another load at 4% per year over three years. OK, he’s going to get a larger proportion back in tax than he would do from a gilt, but he could have borrowed all of the money over five years at 1.5% per year on the gilts market (on 14th May, he raised £4 billion for five years at 1.5% and he could have borrowed more at that rate if he’d have wanted to; he did the same in April). The tax saving is probably cancelled out by the extra admin cost of collecting in lots of small bits of money.

Now, to my simple mind, paying over the odds for credit isn’t “a huge success”. It’s pretty stupid. My tax money is being used to fund the extra interest. My extra interest could have been used to help provide public services (maybe even for the elderly); it could have been used to give some “hard working families” their child benefit back, or to reduce the ever rising cost of university education.

So why are the rest of us subsidising the old?

Old folk are particularly keen on voting. And, I guess, those with more than £10,000 of available funds to invest are even more likely to vote.

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