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

Blow to savers as NS&I cuts £1m deposit limit on bonds by 99%

Written by: Paloma Kubiak
NS&I has cut the £1m savings limit on its popular growth and income bonds to just £10,000 to meet ‘financing targets’.

The government’s saving arm relaunched its one and three-year guaranteed growth and income bonds in December, allowing savers to deposit up to £1m into the products.

But just six months in, it has slashed the maximum amount new savers can deposit to just £10,000 (£20,000 for joint accounts) – a massive 99% cut – effective from today.

One of the big draws of NS&I savings products is that amounts are backed by HM Treasury and are therefore 100% capital protected. Ordinarily, banks come under the Financial Services Compensation Scheme (FSCS) meaning a maximum of £85,000 is returned to savers if the bank goes bust.

The good news is that existing savers who already have a one or three-year guaranteed growth or income bond will be able to re-invest up to £1m when their product matures. If these savings are cashed in and the customer opens a new issue of the bond, however, they’ll only get a £10,000 savings limit.

The current NS&I bond interest rates will remain the same, after they were cut in March this year:

  • The one-year Guaranteed Growth Bond pays an interest rate of 1.50% gross/AER, while the three-year Bond pays 1.95% gross/AER
  • The one-year Guaranteed Income Bond pays an interest rate of 1.45% gross/1.46% AER, and the three-year Bond pays 1.90% gross/1.92% AER.

NS&I said changes to the investment limit were needed in order to achieve its ‘net financing target for 2018/19’, and the decision was made rather than cutting the interest rate which “presents a fair offer to savers”.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said savers with a lot of cash loved these products, because they could save up to £1m in each, with a government-backed guarantee.

Now that the savings limit has dropped substantially, she said new savers should “look elsewhere for a better rate”.

“The three-year NS&I Guaranteed Growth Bond offers 1.95% interest, which is well below the most competitive fixed rate over this period (2.31% from RCI Bank).  Competition in the one-year fixed rate account market, meanwhile, has been intensifying in recent weeks, so you can now get up to 2.05% (Atom Bank) compared to the 1.5% available from NS&I’s Guaranteed Growth Bond.

“In both instances, even if they have £1m and have to spread it over the 12 most competitive accounts in order to ensure their money is protected by the FSCS, savers will still get a better rate on even the least competitive of the 12 than they would from NS&I at the moment.”

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.

The savings accounts paying the most interest

It’s time to get your finances in shape for summer, and moving your cash savings to a higher paying deal is ...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal 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.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

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...

Money Tips of the Week

Read previous post:
TSB product transfer mortgage service delayed by IT issues

TSB is still not able to offer its customers mortgage product transfers after pulling the service at the start of...