This bond will hardly set the world on fire
IT IS a pretty desperate state of affairs when a savings product comes along that pays an interest rate below the rate of inflation – and still proceeds to sell like proverbial hot cross buns. But that is exactly what has happened in the last few days in response to the latest product launch from National Savings & Investments, the giant Government-backed savings institution.
Although initial sales figures have yet to be released, it appears there is a huge appetite among savers for the threeyear Investment Guaranteed Growth Bond, paying a fixed 2.2 per cent interest.
‘Sales are going very well, as expected,’ is all a tight-lipped spokesperson would tell The Mail on Sunday. But maybe not as well as the organisation’s previous launch – the Pensioner Bond in January 2015 – judging by the fact that the NS&I website has yet to crash.
Naturally, the Government believes this latest offering demonstrates its commitment to ‘creating a nation of savers’ (Simon Kirby, Economic Secretary to the Treasury), following in the wake of the hike in the annual Isa allowance to £20,000 and the launch of the Lifetime Isa.
But I beg to disagree. For a start, the bond is no more than window dressing given the pitifully low savings limit of £3,000. It is also the wrong product at the wrong time. Nobody will receive a return on the bond until it matures, making it a non-starter for millions of savers desperately searching for regular income.
If the Government was really interested in reigniting the savings habit, a regular income bond would have been a far better idea. In providing fixed interest, the bond is also likely to become less attractive the longer it is held. Inflation of 2.3 per cent already means buyers will be losing money in real terms from day one – and inflation is going one way (skywards). When interest rates start rising, the last place you want your money to be is in a fixed rate savings bond.
It is also disappointing the bond is only available online – and not by post or phone. Surely, a case of financial exclusion. Having had my moan, the 2.2 per cent fixed rate is market-leading (the best competing three-year bond from Secure Trust Bank pays two per cent).
With banks and building societies in no mood to push up rates and give National Savings a run for its money, it is likely to be top of the cash pops until the bond’s supply – £7 billion’s worth – is depleted. So fill your boots if you have £3,000 lying around in a decrepit savings account paying you 0.01 per cent interest (there are plenty of them around). But don’t expect it to change your life. STAYING on the subject of National Savings, Lord Lee of Trafford has been in touch with a snippet he thought might be of interest to holders of ever popular Premium Bonds.
Lord Lee, famous for being an Isa millionaire, recently asked a pertinent question in the House of Lords about whether it is time for National Savings to freshen up Premium Bonds.
He believes a shake-up would do wonders for sales. Among his ideas is for the maximum holding limit of £50,000 to be scrapped. He also would like to see sales extended to charities and sports clubs as well as the right for bond holders to direct any winnings – say below £100 – into a charity of their choice.
Of course, such imaginative ideas were politely batted away by the Treasury’s Baroness Neville-Rolfe who said they would present ‘significant operational implications’ for National Savings.
But her response also contained details of the mountain of prizes that have yet to be claimed by bond holders. More than 1.3 million prizes remain unclaimed, totalling £55.2 million.
So, as well as hunting for Easter eggs this Bank Holiday weekend, may I suggest you take time out to check whether you have a prize yet to claim. You can do this by using the Premium Bond prize checker service at website nsandi.com.
Or, if you have lost your bond details, then mylostaccount.org. uk should be able to track them down. Fingers crossed.
Fill your boots if you have £3,000 lying around – but don’t expect it to change your life