Pensioner Bonds looked good a year ago. Now take the money and run

George Osborne promised the bonds would provide "certainty and comfort" for over-65s, but the certainty turned out to be short-lived as, from the end of this month, the interest paid almost halves

Were the one year Pensioner Bonds Osborne's attempt to buy votes? (Getty Images)

One anxious reader – who asked not to be named – wrote this week: "With some urgency, could you give some advice where we pensioners can invest the £10,000 one-year bond that matures on 30 January. NS&I [National savings & Investments] wants to know by 28 January what our intentions are – and if no response is given to its request, it will automatically reinvest the sum in a one-year bond giving only 1.45 per cent interest gross/AER."

In fact the government-backed savings institution announced the change in mid December and we reported it in these pages. But it is certainly timely to remind anyone who was tempted by the terribly attractive rates offered by Pensioner Bonds over a year ago that it's time to switch your savings to a better home.

The bonds were surprisingly launched by George Osborne in the Chancellor's 2014 Autumn Statement. Announcing that they would pay a market-leading 2.8 per cent (4 per cent for three-year bonds), he promised they would provide "certainty and comfort" for over-65s.

But the certainty turned out to be short-lived as from the end of this month the interest paid almost halves. You'd be forgiven for believing that the whole thing was just a cheap way for the Tories to buy pensioner votes ahead of last May's general election.

You should certainly move your money to a new home now, advises Anna Bowes of SavingsChampion.co.uk. "Much better rates can be found elsewhere, and by doing nothing, the extra interest earned from the competitive rates offered earlier in the year will be eroded by the poor rates being offered on maturity."

What are your options? If you want another one-year fix, Ms Bowes says the best account at the moment is RCI Bank's one-year fixed-term savings account, which pays 2.06 per cent. But for those who are really safety conscious and want an account protected by the UK's Financial Services Compensation Scheme (RCI is French), the next best is Paragon Bank's one-year fixed-rate bond, which pays 2.01 per cent but can only be opened online.

If you're looking for a two-year fix paying more than the 1.7 per cent gross/AER offered on NS&I's two-year guaranteed growth bond (issue 51), there are also lots of options, says Ms Bowes. Al Rayan Bank pays 2.75 per cent, while RCI's two-year fixed-term savings account offers 2.35 per cent.

If you want the extra comfort of a UK-regulated institution, Axis Bank's two-year fixed deposit pays 2.27 per cent, while United Trust Bank's two-year tracker bond currently offers 2.25 per cent and guarantees to be 1.75 per cent above the Bank of England base rate.