Government-backed 3-year bond paying 2.2% launches
The NS&I Investment Guaranteed Growth Bond gives people access to a market-leading rate on savings between £100 and £3,000 and is available to savers aged 16 and over.
Chancellor Philip Hammond announced the launch of the product at the Autumn Statement last year in a move to support savers who have been affected by low interest rates.
It can only be purchased online at nsandi.com until 10 April 2018.
Savers can cash in all or part of the bond online before the end of the term but will be hit with a penalty equal to 90 days’ interest on the amount cashed in. That means if you cash in within 90 days of buying the bond, you’ll get back less than you invested.
While the market-leading rate is expected to entice savers, experts have played down the product’s appeal.
“With the maximum balance set at just £3,000 and having to lock your cash away for three years it’s scant reward for savers who have had to endure rock bottom rates at the expense of borrowers for far too long,” said Andrew Hagger, financial expert at Moneycomms.
He said the “much heralded” 2.2% rate doesn’t deliver a great deal when you crunch the numbers.
Savers will get just £6 extra a year in interest by opting for the NS&I product over the next best deal from Secure Trust, which pays 2.0%, and is covered by the Financial Services Compensation Scheme (FSCS).
The rate also falls short of inflation, which hit 2.3% for the second month running in March and is expected to continue rising.
Demand for the new bond is expected to be high, however.
“Undoubtedly it will be popular not least because of the Treasury-backing and, unlike the pensioner bond of 2015, this savings bond is available to everyone aged 16 and over, and for a full year,” said Danny Cox, head of advice at Hargreaves Lansdown.
Hagger added: “The bond will no doubt prove popular as savers are desperate to grasp any opportunity in the current low rate climate; particularly as the option of high interest current accounts are no longer really viable since the banks slashed the rates on offer.”