Savers who back in 2015 had the good sense to invest in National Savings & Investments’ three-year 65+ Guaranteed Growth Bond have a decision to make. The bonds are about to mature and, if you do nothing, the money will be reinvested for a further three years.
Between January and May 2015, almost 900,000 people invested more than £8.9bn in the “pensioner bonds”, as they were dubbed at the time, with many attracted by the promise of a 4% return. At the time, they were the hottest savings product around, and NS&I struggled to cope with demand.
Fast forward to this month, and the government-backed bonds are set to start maturing on 15 January. Pensioners were allowed to invest up to £10,000 each. With the accumulated interest, this means that about £10bn will be maturing over the coming months. Those who put away the full amount in 2015 can expect about £11,300 to be returned to them now.
NS&I says it has started writing to bondholders setting out their options. Customers can cash in the bonds as normal; however, they need to be aware that if they do nothing, NS&I will automatically reinvest the cash into its re-launched Guaranteed Growth Bond for a further three years. It currently pays 2.20%.
Anna Bowes, director at independent savings advice site Savings Champion, says: “Savers who have been enjoying 4% per annum are clearly going to be disappointed that on maturity their return will drop by at best over 43%, as the best three-year rate on the open market is paying just 2.25% gross/AER.”
She describes the NS&I automatic rollover option as “very competitive” and, as result, it is probably not going to be worth moving the money elsewhere, provided the saver is happy to tie up their money for another three years.
“It helps that these come with an option to access the funds early, if necessary, with a penalty equivalent to 90 days interest on the amount to be withdrawn,” she says.
Those who would prefer not to do this need to make sure they return their instructions by post or online. Last November, NS&I announced it would not be accepting maturity instructions over the phone.
So what are your options? Those looking for the highest-paying instant access account should consider the AA’s bonus saver, which is currently paying 1.32%. This includes a 1.12% bonus for the next 12 months, meaning you will have to move it after a year.
The Post Office has the highest-paying conventional one-year bond. Its Online Bond is currently paying 1.78% fixed for 12 months. The two-year bond pays 1.91%.
