You are here: Home - Saving & Banking - News -

BUDGET 2017: NS&I bond paying market-leading 2.2% confirmed

Written by: Paloma Kubiak
The chancellor has confirmed that the new NS&I three-year savings bond will pay 2.2% when it launches next month, but experts say it will offer little relief for savers amid a background of rising inflation.

In his Budget statement today, Philip Hammond confirmed further details of the Investment Guaranteed Growth Bond which will be available from the government’s savings arm, NS&I, and launch in April.

Here are the key points for savers:

  • The three-year bond will pay a rate of 2.2%
  • The minimum investment is £100, the maximum is £3,000
  • It will be available for 12 months from April 2017

While the chancellor said the new product will be a “welcome break for hard-pressed savers”, the maximum interest you can earn is £66 a year or £198 in three years without taking into account any compounding of interest. With compounding, the maximum amount you’d receive is just over £202.

Maike Currie, investment director for personal investing at Fidelity International, said a rate of 2.2% over a three-year term barely covers the Office for Budget Responsibility’s (OBR’s) inflation expectations.

“While this may be a market-leading rate, anyone saving into the new investment bond will struggle to achieve a real return with OBR expectations for inflation to rise to 2.4% in 2017, 2.3% in 2018, before falling back to 2.0% in 2019.

“To stand any chance of generating an inflation-beating return in the current environment, you’re far better off looking further up the risk spectrum, investing in bonds issued by companies rather than the government or moving into stocks and shares.”

Anna Bowes, director of independent savings advice site,, said it was disappointing the rate was not higher, given the improvements in the wider market in the time since the bonds were originally announced in the Autumn statement last year.

“The new bond will mean savers can earn up to £3,202 in interest over the three-year term, but this is just an extra £6 a year more than they could get on the open market. The current best rate on a three-year fixed rate bond available to all is 2% gross/AER with Secure Trust Bank and in fact Atom Bank actually matches NS&I, paying 2.20%, but only for those happy to apply via an app.”

Bowes said that with the positive movements in the savings market in recent months, she “wouldn’t be surprised” if more challenger banks quickly catch up and beat the rate on offer from the NS&I bond.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
Foxtons profits crash 54% as sales slump on ‘unprecedented’ year

Foxtons saw pre-tax profits plummet by 54% to £18.8m last year following what it called “an unprecedented sequence of events”.