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NS&I relaunches guaranteed growth and income bonds

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Written by: Paloma Kubiak
04/12/2017
The government’s saving arm, NS&I, has relaunched its one and three year guaranteed growth and income bonds. How do they stack up?

These products are back on general sale for the first time since 2009 but you can only open them online:

  • The 1-year Guaranteed Growth Bond will pay an interest rate of 1.50% gross/AER, while the 3-year Bond will pay 2.20% gross/AER.
  • The 1-year Guaranteed Income Bond will pay an interest rate of 1.45% gross/1.46% AER, and the 3-year Bond will pay 2.15% gross/2.17% AER.

They can be opened by anyone over the age of 16 and the minimum investment is £500 while the maximum is £1m per person per issue.

Savers also benefit from NS&I’s 100% HM Treasury guarantee on the full amount of up to £1m.

While the bonds are designed to be held for the whole term, they can be cashed in early with a penalty equivalent to 90 days’ interest on the amount cashed in. You must keep a balance of at least £500 to keep the bonds open.

How do they stack up?

These bonds aren’t quite as generous as previous NS&I offerings, but they are competitive, according to Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“The 3-year Guaranteed Growth Bond looks particularly strong, offering the second highest interest rate for a minimum investment of £500 over this term – and matching its current three-year offering, which is on sale until April 2018. The 1-year Guaranteed Growth Bond is also among the top five most generous rates (for £500) over this period, in the current market.”

Coles added that with the maximum £1m saving allowance, all guaranteed by the government, this offer will be particularly attractive to investors with significant savings.

“Their savings would otherwise need to sit in numerous accounts – with gradually less rewarding interest rates – in order to be protected under the £85,000 limit of the Financial Services Compensation Scheme,” she said.

However, data from Moneyfacts reveals the current top rate for a one year bond is an expected 2% profit rate from BLME, though the minimum investment is £25,000.

Otherwise, Atom Bank’s one-year bond offers 1.95% with an investment of just £50. For a three-year term, Atom Bank pays 2.25%. While the competitors offer more attractive rates, non of them offer NS&I’s 100% capital security.

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