National Savings and Investments has today revealed the rate it will be paying on its new British Savings Bonds.
The three-year fix will pay 4.15 per cent. The bonds were announced by the Chancellor in the Budget and are now available to open on NS&I’s website.
There are two versions of the bond available – Guaranteed Growth Bonds which pay 4.15 per cent over three years and Guaranteed Income Bonds which pay 4.07 per cent over three years.
The latter allows savers to take the interest paid out each month. Neither accounts are tax free.
British Savings Bond: NS&I has launched it three-year fixed-rate bonds today which were announced by the Chancellor in the Autumn Statement
The bonds are three-year versions of NS&I’s best-selling one-year Guaranteed Growth and Income bonds, which paid a far higher rate of 6.2 per cent. These were pulled from sale in October.
NS&I said it intends for the three-year bonds to be on sale for an extended period of time.
The minimum investment in the bonds is £500 and the maximum is £1million in each issue.
The accounts are online-only, and are not available to be invested in via phone or post.
However, on its website, NS&I says: ‘It is designed to be invested in online. However, if you can’t invest online, please call us and we’ll let you know your options.’
The best one-year fix now pays 5.25 per cent and is offered by Secure Trust Bank. A saver putting £10,000 into this account would have around £10,538 by the end of the term.
The best three-year fix pays 4.75 per cent and comes from Skipton Building Society. This account has a 30 month term. If a saver put £10,000 in this account, after a year they would have around £10,485.
Savings experts do not think the rate NS&I’s bonds offer will be attractive enough to most savers, with one expert saying they could be ‘doomed to mid-table mediocrity.’
Sarah Coles, head of personal finance at Hargreaves Lansdown said: ‘They’ve gone on sale, offering 4.07 per cent and per cent over three years. This is disappointing, especially after the fanfare in the Budget, because it’s so far behind the market leaders. At this rate, these bonds risk disappearing without a trace.
‘NS&I was always going to have to offer something special to get savers excited about three-year savings deals.
‘These NS&I rates just aren’t special enough to persuade swathes of new savers to tie their money up for longer.’
While Andrew Hagger, founder of website Money Comms said they may appeal to savers with bigger pots.
He said: ‘For savers with balances in excess of £85,000, the Financial Services Compensation Scheme (FSCS) limit, these bonds may be appealing in that you can deposit up to £1million which is fully protected via HM Treasury.
‘Those with smaller balances can currently get a three-year fixed-rate bond paying 4.65 per cent with Hampshire Trust Bank or Close Brothers Savings.
‘That extra 0.5 per cent on the rate is worth £250 per year to someone with a £50,000 balance and £750 over the three-year term.
‘For a saver with a £20,000 pot it’s £100 per year and £300 over three years, so worth looking at other fixed rate options.’
Bim Afolami, Economic Secretary to the Treasury, said: ‘This is a new opportunity for savers to benefit from the three-year fixed-rate British Savings Bonds knowing that their money is fully protected by the Treasury.
‘The Bonds will help to grow the savings culture in the UK while providing cost-effective financing for the Government.’
Dax Harkins, NS&I chief executive, said: ‘British Savings Bonds are there to help people save for the longer term and support their savings goals, safe in the knowledge that their investments are 100 per cent protected.
‘As with all savings with NS&I, money is invested back into supporting the UK through government financing.’
