National Savings & Investments launches new guaranteed income and growth bonds
These are the first guaranteed income and growth bonds NS&I has sold in eight years, as it looks to attract more money from savers.
The bonds pay up to 2.2 per cent a year, making them among the best, and with savers allowed to put away up to £1million, they will benefit those with large balances.
However, savers are still advised to shop around for the best rates available.
NS&I’s new Guaranteed Growth Bond will pay a fixed 1.50 per cent for 12 months, or 2.2 per cent a year over three years.
The Guaranteed Income Bonds, which pay monthly, offer 1.45 per cent over 12 months and 2.15 per cent over three years.
They can only be purchased online through Nsandi.com, although they can then be managed by phone or post.
They are open to savers aged 16 and above with a minimum investment of £500 and a maximum limit of £1million in each of the Growth and Income bonds, or £4million in total.
Chief executive Ian Ackerley said the move followed NS&I’s decision to pass on the 0.25 per cent base rate hike to all of its variable rate savings products including Premium Bonds on December 1.
NS&I has launched four new guaranteed bonds offering best-buy interest rates to savers
These new bonds are part of NS&I’s target to attract between £ 10 billion and £16billion in the next tax year.
Hargreaves Lansdown personal finance analyst Sarah Coles said: “The last time it had such a bold target we saw the so-called Pensioner Bond paying 4 per cent over three years.
“These bonds are not quite so generous, but they are competitive.”
She said the three-year Guaranteed Growth Bond at 2.2 per cent looks strong, making it the among the highest savings rates for a minimum investment of £500 over this term.
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NS&I already offers a three-year Investment Guaranteed Growth Bond paying 2.2 per cent, but deposits are limited to a maximum £3,000.
The new higher £1million limit will help those wanting security for larger balances.
Coles said: “Currently, many will be spreading their money across numerous bank accounts with gradually less rewarding interest rates to get full protection under the Financial Services Compensation Scheme (FSCS) which covers a maximum £85,000 per account.”
These bonds offer 100 per cent protection for up to £1million, all at a market-leading rate, she added.
Tom Adams, head of research at savings advice site SavingsChampion.co.uk, said NS&I is a popular safe haven, but better rates are available for those willing to try less familiar names protected by the FSCS: “Challenger banks Atom Bank, Masthaven and Investec all pay a generous 1.85 per cent fixed for one year, which is comfortably ahead of the 1.50 per cent that NS&I pays over the same period.”
NS&I is much harder to beat over three years, with Atom Bank ahead by a whisker, paying 2.20 per cent on £50 and above rather than £500.
Adams said these bonds are unlikely to reach the same giddy heights of popularity as Pensioner Bonds, which start to mature in 2018: “At least savers now have government-backed options that are broadly in line with the market.”
These new bonds are part of NS&I’s target to attract between £10 bn and £16 bn in the next tax year
Damien Fahy, founder of personal finance website MoneyToTheMasses.com, said it is a sign of the times that we are getting excited at rates that are well below consumer price inflation, currently 3 per cent: “Until inflation falls below 2.2 per cent savers are guaranteed to lose money in real terms.”
The big banks are finally increasing savings rates after last November’s interest rate rise, but are still well off the mark, according to research from MoneyFacts.co.uk.
Barclays, Halifax Everyday Saver and Lloyds Easy Saver accounts pay 0.20 per cent, NatWest Instant Saver Account pays just 0.10 per cent.