Written question asked by Vincent Cable (Liberal Democrat) on Tuesday, 16 March 1999, in the House of Commons. It was due for an answer on Friday, 26 March 1999. It was answered by Patricia Hewitt (Labour) on Friday, 26 March 1999 on behalf of the Treasury.

Treasury

Question: To ask Mr Chancellor of the Exchequer, what criteria were used in setting the current interest rate for pensioner bonds. - Including ref to 327 c173-91.

Answer: Dr. Cable: To ask the Chancellor of the Exchequer what criteria were used in setting the current interest rate for pensioner bonds. [77546] Ms Hewitt: Pensioners' Bonds are priced like other National Savings products, taking account of the need to compete in the retail savings market, and the need to provide cost-effective financing for the government. Recent reductions in the interest rate on Pensioners' Bonds mainly reflect reductions in medium term interest rates generally, which in turn reflect expectations of lower inflation over the next five years. Lower inflation reduces the erosion of the value of the capital sum invested. Pensioners' Bonds offer a monthly income which is set at a fixed rate for 5 years. The Chancellor announced in his Budget on 9 March 1999, Official Report, columns 173-90, that National Savings would redesign Pensioners' Bonds to offer a shorter term product. This should provide pensioners with more choice.

Secondary information

Type: Written question
Reference: 328 c447-8W; 77546
Session: 1998-99
Subjects: Investment Interest rates Personal income Pensioners National savings bonds Pensioners guaranteed income bonds