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NS&I launches new fixed-rate savings deals and the first guaranteed income bonds in eight years

  • NS&I has launched three-year savings account with 2.2% rate
  • This account will allow up to £1m to enter – unlike bond launched earlier in year
  • One-year rate also available but can be beaten in our best buy tables 

Savers can now get their hands on four new accounts from National Savings and Investments as it looks to attract more cash this financial year.

It has launched two Guaranteed Growth Bonds. The one-year option has a 1.5 per cent rate while the three-year rate is a near market-leading 2.2 per cent.

This is the same rate that was launched earlier in the year in the form of the Investment Guaranteed Growth Bond. However, this new account allows a far more generous £1million to enter, rather than a ceiling of £3,000.

A pair of Guaranteed Income Bonds pay slightly lower rates at 1.45 per cent and 2.15 per cent, but offer the chance to have interest paid monthly.

New bonds: NS&I have today announced four savings products including monthly income options

New bonds: NS&I have today announced four savings products including monthly income options

The new deals' £1million maximum limit may be proof that the take-up of the special bond earlier in the year – announced in the 2016 Budget by Chancellor Philip Hammond – has been slow.

NS&I had ambitious targets to attract £10billion to £16billion of net financing in the current tax year. 

However, this has been downgraded to £5billion to £11billion, it says, as a result of 'changes in the savings market'.

The Government-backed savings provider refused to give This is Money an update on the bonds earlier in the year, despite frequently giving updates on its 'Pensioner Bonds' launched in 2015.

The return of the Guaranteed Income Bond

NS&I has also launched a Guaranteed Income Bond offering 1.45 per cent over a year and 2.15 per cent over three, giving those needing a regular income payment a much needed boost.

It says it is the first time these products have been on general sale since 2009. All of these products are only available to open online.

However, they can be managed online, by phone and post, once open. The minimum investment is £500.

The move comes after NS&I boosted rates on a number of products last month in the aftermath of the Bank of England decision to nudge interest rates from 0.25 per cent to 0.5 per cent.  

Ian Ackerley, chief executive of NS&I, said: 'We are really pleased to be able to bring Guaranteed Growth Bonds and Guaranteed Income Bonds back on sale, which is another boost to savers following rate increases to our variable rate products, including Premium Bonds, on 1 December.

'Savers can already invest up to £3,000 in the three-year Investment Guaranteed Growth Bond, which is on sale until April 2018.

'These Issues of Guaranteed Growth Bonds and Guaranteed Income Bonds will also help those who want a one-year investment or who want to invest additional savings for three years.

'As well as being able to invest up to £1million per person, per Issue in our one or three-year Bonds, savers will also benefit from NS&I's 100 per cent HM Treasury guarantee.'

How do the rates compare?

Rates on growth bonds are 1.5 per cent over one-year and 2.2 per cent over three years, while the income bonds are 01.45 per cent and 2.15 per cent, respectively.

Currently, savers can get a far higher 1.95 per cent fixed for one year with challenger bank Atom, according to the independent This is Money savings tables.

Al Rayan has a 1.85 per cent rate and Milestone Savings 1.82 per cent.

In the three-year stakes, the rates look much more attractive. The best buy is 2.25 per cent from Atom Bank, followed by 2.21 per cent at Ikano and 2.2 per cent at Paragon and Vanquis Bank.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: 'The last time NS&I had such a bold financing target we saw the launch of the so-called Pensioner Bond, paying four per cent over three years, which saw £2.3billion invested in its first three days.

'These bonds are not quite so generous, but they are competitive. 

'At the time of writing, the three-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.

'With a minimum investment of £500 and maximum of £1million – 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 – in order to be protected under the £85,000 limit of the Financial Services Compensation Scheme.' 

 

ABOUT THE AUTHOR celebrityrave

Journalist, writer and broadcaster, based in London and Paris, her latest book is Touché: A French Woman's Take on the English. Read more articles from Agnes.

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