NS&I launches ‘growth and income bonds’: should savers sign up?

NS&I has today reintroduced one-year and three-year guaranteed growth bonds and

The one-year guaranteed growth bond pays an interest rate of 1.5 per cent AER, while the three-year bond pays 2.2 per cent AER.

When it comes to the guaranteed income bond, the one-year account pays an interest rate of 1.46 per cent AER, while the three-year bond pays 2.17 per cent AER.

The bonds can only be purchased online through Nsandi.com and you need to be aged 16 or over to get one.

You can manage the bonds online, by phone, and by post with a minimum investment of £500 and a maximum limit of £1 million per person per issue.

Cash in before the term ends, and you’ll be charged an early exit penalty equivalent to 90 days’ interest on the amount cashed in.

Are the bonds any good?

Currently, all the new NS&I bonds can be beaten by Atom Bank, which is market-leading in both the one-year and three-year savings bonds categories for those with minimum balances of £500 or less.

Atom Bank’s one-year fixed saver pays 1.95 per cent, while it’s three-year fixed saver paus 2.25 per cent. Both accounts also have a lower minimum balance requirement of £50. 

One of the great benefits of NS&I is the protection. All money deposited with NS&I is 100 per cent secure as it is protected by HM Treasury.  For other providers, the Financial Services Compensation Scheme covers up to £85,000 per person, per banking licence.

Commenting on the launch, Sarah Coles, personal finance analyst at Hargreaves Lansdown, says: ‘These new bonds are part of NS&I’s ambitious target to attract between £10 billion and £16 billion of Net Financing in the next tax year. The last time it had such a bold target we saw the launch of the so-called Pensioner Bond, paying 4 per cent over five years, which saw £2.3 billion invested in its first three days. These bonds are not quite so generous, but they are competitive.

‘With a minimum investment of £500 and maximum of £1 million – guaranteed by the government, it 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 - to be protected under the £85,000 limit of the Financial Services Compensation Scheme. These bonds offer 100 per cent protection for up to £1 million.’

Meanwhile, more than 25 million NS&I Premium Bond and savings account holders are set to benefit from increased returns.

In the wake of the Bank of England’s decision to raise the base rate by 0.25 per cent to 0.5 per cent, the government-backed provider announced it will increase both the number of prizes and the chance of winning with its Premium Bond prize draw.

This is article was originally written by our sister publication Moneywise.

Keep up to date with all the latest financial news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.  


Subscribe to Money Observer magazine

 

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
By submitting this form, you accept the Mollom privacy policy.