Government bonds offer 3% return for pensioners

Finance minister Edward Scicluna this morning announced that the government will be issuing a savings bond called ‘62+ Government Savings Bond’ for pensioners aged 62 and above.

The bond, which will be issued on 4 September, will have a five-year maturity at an interest rate of 3% which will be payable twice a year.

Addressing a press conference at the bond, the minister said the bond would be issued to offer pensioners the opportunity for additional income in light of the fact that in recent years, interest rate on fixed bank accounts have decreased substantially, leading to a sharp decline in pensioners’ income from their savings.

Scicluna explained that with inflation standing a “historic all-time low”, interest rates had plummeted and in some cases, fallen below 0%, resulting in investors having to pay banks interest, rather than receive it, when investing their money. He added that this was a result of quantitative easing – a monetary policy where a central bank, in this case, the European Central Bank, creates new money to buy government bonds in order to stimulate the economy.

Scicluna added that the difference between the 62+ bond and other government bonds, which mature in a similar period of time, was that the yield for the latter type of bond was 1%. This, he said, meant that the government would be subsiding investment by the elderly.

Once the bond is issued, all those born in 1955 or earlier will be able to purchase up to €10,000 in bonds. He said the bond was intended for small-time investors, which was why the limit was set at €10,000.  

According to the minister, those who buy bonds will be able to cash them in before the five-year period in cases of serious health problems while those wishing to cash them in for other reasons will be required to pay three months’ worth of interest. Cashing-in bonds early usually requires investors to pay one years’ worth of interest, he added.

Scicluna said that the government would be issuing the law in September to give people time to decide on the best course of action for themselves.

Moreover, he said that the bond was being launched now because for the government to offer a yield which was substantially higher than that offered by the market, changes to the Treasury Bills Act needed to be approved by parliament.

In addition to allowing for the bond to be issued, Scicluna said that the amendments to the law would “increase the treasury’s responsibility when it came to issuing reports”, and would allow the government to borrow money abroad and in foreign currencies.