From January 2015 National Savings and Investments will launch new one and three year bonds available to retirees.
Available to those over 65, NS&I will issue up to £10bn through a one year bond expected to pay 2.8 per cent and a three year bond paying 4 per cent with an investment limit of £10,000 per bond.
Further details will be confirmed in the 2014 Autumn Statement.
Interest on the bonds will be taxed in line with all other savings income at the individual’s rate.
The Treasury says: “These will provide certainty and a good return for those who have saved all their lives and now mostly rely on their savings for income.”
NS&I is the Treasury-backed savings vehicle behind premium bonds.