The new Investment Guaranteed Growth Bonds, announced by the Chancellor in the November 2016 Autumn Statement, have been launched today and are now on sale for 12 months, available online only at nsandi.com.
As confirmed by the Chancellor in the Budget on 8 March 2017, the Bonds offer what NS&I describe as a market-leading rate of 2.20% gross/AER, fixed over a 3-year term.
Key features of the Bonds are as follows:
- 3-year fixed term Bond at 2.20% gross/AER.
- The Bonds are available to aged 16 or over.
- On sale for 12 months and available to buy online only at nsandi.com.
- Investment limits apply: minimum of £100 and maximum of £3,000.
- Designed to be held for the whole term, but can be cashed in early with a penalty equivalent to 90 days’ interest on the amount cashed in.
- Investments can be made individually or jointly.
- Fixed rates are guaranteed for the whole term, with interest added on each anniversary. This means customers will benefit from compound interest.
- Interest earned without deducting any tax. However, the interest is taxable so it will count towards the customer’s Personal Savings Allowance.
- 100% capital security as NS&I is backed by HM Treasury.
Although these Bonds offer a good comparative rate of interest and in many cases will be tax free, the current inflation rate (as measured by the Consumer Price Index – CPI – for March) is 2.3% – so, in real terms the capital value will struggle to keep up with inflation.
Some critics have described the interest rate as “underwhelming”.
“The chance to earn 2.2% in today’s depressed savings market may look appealing at first glance, but it’s not that generous in the scheme of things,” said Andrew Hagger of Moneycomms on BBC online.
“With the maximum balance set at just £3,000 and having to lock your cash away for three years, it’s scant reward for savers who have had to endure rock-bottom rates for far too long.”
Two years ago, so-called pensioner bonds offered a return of up to 4%.
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