Bonds’ licence to thrill
TWO SAVINGS products that have been hugely popular among pensioners in the past are making a welcome return after a three-year absence, paying competitive rates of up to four per cent a year.
They come with added peace of mind as they are issued by National Savings & Investments (NS&I), which means they have the backing of HM Treasury.
NS&I is on a roll right now after hiking its Premium Bonds prize rate to a 14-year high of 3.15 per cent, more than triple the 1 per cent it paid this time last year.
It has reintroduced its one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds, which were last on sale in 2019.
The growth bond will pay four per cent a year, while the income bond pays 3.90 per cent, the highest NS&I has paid on these two products since 2010.The minimum investment is £500 in each issue, with the maximum £1million.at maturity after one year, savers can either withdraw their cash or reinvest.they cannot access their funds in the interim.
Almost 500,000 existing NS&I customers with one, two, three or five-year Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates accounts can access the new rates if they reinvest at maturity.the two, three and five-year products remain closed to new customers. The new NS&I one-year bonds come as welcome news for savers amid signs that savings rates have started to slip lately, despite the Bank of England hiking base rates for the 10th time in a row to four per cent last Thursday, said Hargreaves Lansdown senior analyst Helen Morrissey: “Savers need to get the most from every penny, especially if they are looking to lock it away for a period, and these products are competitive.”
She added that NS&I’S Treasurybacked guarantee will continue to reassure savers: “Especially those with larger sums who would exceed the Financial Services Compensation Scheme (FSCS) cap of £85,000.”
Myron Jobson, senior personal finance analyst at Interactive Investor, called the new rates “another shot in the arm” for the NS&I product range: “It follows recent NS&I moves to hike rates on its Direct Saver and Income Bonds from
2.30 per cent to 2.60 per cent, while its tax-free Direct Isa rises from 1.75 per cent to 2.15 per cent.” NS&I also increased the interest rate on its Junior Isa from 2.70 per cent tax-free to 3.40 per cent, benefiting 80,000 under-18s.yet these are far from market leading. Jobson added: “As always, it pays to compare rates and shop around for the best savings.”
It is possible to get more than four per cent from a one-year fixed rate bond, with Smartsave paying 4.16 per cent, while Atom Bank and Close Brothers both pay 4.15 per cent.
More cautious savers may favour NS&I over these little-known challenger banks, although they also benefit from FSCS protection.
Jobson said that it is possible to get more interest if you can lock your money away for five years. Over that extended term,atom Bank pays 4.45 per cent and Ford Money pays 4.40 per cent a year.
Unfortunately, today’s best-buy savings rates are mostly available only online. That also applies to NS&I’S Guaranteed Growth Bonds and Guaranteed Income Bonds. Savers can still apply for Premium Bonds by post, though.