Don’t get locked in to a dud deal

Hundreds of thousands of savers risk being locked into pitiful deals when their fixed bonds mature this year.

Most banks and building societies move your cash into an easy access account when your bond matures. But some, including national savings & Investments (ns&I) automatically reinvest your money in new fixed bonds which pay as little as 0.1 pc.

Once your money is in the new bond you typically have a month to withdraw it before it is trapped until the end of the new term.

Fixed rates have plummeted over the past 12 months. The average one-year bond now pays just 0.49pc compared to 1.2pc a year ago, according to data analysts Moneyfacts.

This means savers will earn just £49 on a £10,000 sum — less than half the £120 they would have received previously. Two-year bonds are also down to an average 0.57 pc against 1.63 pc two years ago.

Around 750,000 savers have £19billion in ns&I Guaranteed Growth and Guaranteed Income Bonds. A year ago, ns&I’s one-year Growth Bond paid 1.25 pc. But for those renewing their bonds today, the rate is just 0.1 pc.

Those who have earned 1.7pc for the past 24 months with its two-year Guaranteed Growth Bond will get just 0.15 pc if their bond is renewed. While the rate on the three-year bond is 0.4pc, and the five-year version pays 0.55pc.

The government bank has also changed what happens when you are rolled over into another bond. Whereas you could previously access your money during the new term, now you will not. ns&I will contact you a month or so before your current bond’s maturity date to ask what you want to do. You then have up until two days before the bond expires to say if you want to cash it in or reinvest. If you fail to respond in time, your money will be automatically reinvested.

skipton Building society also automatically reinvests savers’ money into a new bond unless they request otherwise. It currently pays a better 0.35 pc for a year.

Yorkshire Bs moves your money to a bond which gives you penalty-free access for a month. After that you have to pay a fee to make a withdrawal. With its one-year bond you will pay the equivalent of 45 days’ interest and 60 days’ for the two-year deal.