Where to turn when 4pc NS&I deal finishes

NEARLY 900,000 savers will be sorely disappointed when their 4 pc National Savings & Investments deal comes to an end over the next four months.

A huge £9 billion has been stashed away in NS&I’s threeyear 65+ Guaranteed Growth Bonds, which mature between January 15 and May 15.

The bad news is that there’s nothing to match the rate they have earned over the past three years. So, what should you do if you don’t want to take big risks with your cash?

Experts warn against doing nothing, or you will find your money tied up for another three years at a much lower rate.

You can expect your letter 30 days before your bond expires. You must then tell NS&I what you want to do with your money at least two working days before your maturity date.

This must be done by post or online — even if you bought the bond over the phone.

If you don’t, your money will be rolled over into NS&I’s threeyear standard Guaranteed Growth Bond. This pays a much lower 2.2 pc, cutting your annual interest on £10,000 from £400 to £220. Once in this bond, you have 30 days to remove your cash without a penalty.

If you miss this deadline, you pay a charge equal to 90 days’ interest — £54 on £10,000 — to get your money back early.

If you are happy to tie up your money for another three years, experts say the 2.2 pc is a competitive deal.

Patrick Connolly, of advisers Chase de Vere, says: ‘We prefer clients to lock away money for less than three years in what could be a rising interest rate environment. But the new deal is a reasonable option.’

Justin Modray, from Candid Financial Advice, says: ‘Rates are unlikely to go up much in the next couple of years, so this looks a decent option, as long as you’re willing to tie up your money for a further three years.’

The experts point out that if rates shoot up faster than expected, you could switch out before the end of the three years. You might earn more paying the 90- day penalty and moving a top-paying bond.

The extra interest minus the early get-out charge could total more than if you were to stick with the NS&I deal to the end.

It will depend on how far rates rise and how long your term still has left to run. Sarah Coles, of advisers Hargreaves Lansdown, says: ‘The 2.2 pc is not to be sniffed at. But don’t just drift into the automatic rollover. Look at tax-exempt cash Isas if your interest on this new bond means you end up paying tax on it.’

Other options for savers with the 65+ maturing bond include NS&I’s one-year bond at 1.5 pc or a two-year bond at 1.7 pc. Or move your money into any of NS& I’s variable- rate accounts, such as its easy- access Direct Isa or Income Bonds, both at 1 pc, Direct Saver at 0.95 pc or even Premium Bonds.

The top taxable one- year fixedrate deal from other providers is 1.77 pc from online OakNorth Bank. For two years, Family BS has a tracker bond at 2.06 pc, where the rate will automatically rise over the term in line with official interest rates.

On cash Isas, Virgin Money pays 1.41 pc for one year and Aldermore 1.65 pc for two years.