One year 65+ Guaranteed Growth Bonds, also known as pensioner bonds, were unveiled by Chancellor George Osborne in his March 2014 Budget, with a headline return of 2.8 per cent.

The products flew off the shelf with hundreds of thousands of older savers taking up the generous government-backed products.

But NS&I has revealed the launch rates are no longer available and that re-investing rates will be much lower at 1.45% for a one-year term, 1.7% for a two-year, 1.9% for a three-year and 2.55% for a five-year.

Bonds were open from 15 January 2015 until 15 May 2015, so the first maturities will be 15 January 2016. NS&I said it will be writing to all holders 30 days before maturity.

Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Halving the interest rate at rollover shows how generous the original pensioner bond was. There will be sighs of relief from banks and building societies who have to face market beating government backed savings competition in the early part of 2016.”

Time to switch 

Anna Bowes, director at Savingschampion.co.uk, said while NS&I’s move was disappointing, it was “not wholly unexpected”.

She added that the new roll over rates are “very uncompetitive” and that savers can find better rates elsewhere.

“We would urge savers to move their funds – not simply roll the money over. By doing nothing, the extra interest earned by taking advantage of the competitive rates on offer earlier in the year, will be eroded by the poor rates being offered on maturity.

“Given that the maximum amount allowed into the 1 Year Pensioner Bond was just £10,000 per person, the maturity proceeds should easily be protected with a new provider, up to the new UK Financial Services Compensation Scheme (FSCS) limit of £75,000 per person, from 1 January 2016.

“So, as long as the new provider is a protected by the UK FSCS or equivalent, why accept a much lower return.”

Best rates elsewhere 

1 Year

NS&I 1 Year Guaranteed Growth Bond (Issue 57) = 1.45% gross/AER

United Trust Bank Fixed Deposit 1 Year Bond – 2.15% gross/AER

2 Year

NS&I 2 Year Guaranteed Growth Bond (Issue 51) = 1.70% gross/AER

FirstSave 2 Year Fixed Rate Bond – 20th Issue – 2.40% gross/AER

3 Year

NS&I 3 Year Guaranteed Growth Bond (Issue 51) = 1.90% gross/AER

FirstSave 3 Year Fixed Rate Bond – 7th Issue – 2.73% gross/AER

 5 Year

NS&I 5 Year Guaranteed Growth Bond (Issue 47) = 2.55% gross/AER

United Trust Bank Fixed deposit 5 year bond – 3.10% gross/AER

Source: Savingschampion.co.uk

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