There was some rare good news for savers this week after National Savings & Investments reintroduced its popular one- and three-year Guaranteed Growth/Income Bonds last offered back in 2009.
NS&I, the government’s savings arm, says its one-year Guaranteed Growth Bond will pay an interest rate of 1.50%, while the three-year deal will earn 2.20%.
For those that prefer their interest monthly, the one-year Income Bonds pay 1.45%, or 2.15% over three years.
This compares with 1.86% offered by the Al Rayan Bank – the highest-paying one-year fixed-rate bond, or 2.25% on the highest paying three-year bond from the Bank of London & the Middle East.
In all cases the NS&I bonds have a minimum of £500 investment (up to a maximum of £1m) per person, per issue. They have to be bought online – through nsandi.com – but, once opened, also can be managed by phone or post.
Savers can cash them in early with a penalty equivalent to 90 days’ interest on the amount withdrawn.
Savers must keep a balance of at least £500 to keep the bond open, it says. Unlike some other NS&I products, the earned interest is taxable, and will count towards the customer’s personal savings allowance.
Ian Ackerley, NS&I’s chief executive, says the move was “another boost to savers” coming on top of rate increases to its variable rate products, including Premium Bonds, on 1 December.
He adds: “As well as being able to invest up to £1m, savers will also benefit from NS&I’s 100% HM Treasury guarantee.”
Sarah Coles, analyst at investment firm Hargreaves Lansdown, says the bonds are part of NS&I’s ambitious target to attract between £10bn and £16bn in the next tax year. “The last time it had such a bold target was the launch of the so-called ‘pensioner bond’, paying 4% over five years, which saw £2.3bn invested in its first three days,” she says.
“These bonds are not quite so generous, but they are competitive. The three-year Guaranteed Growth Bond looks particularly strong, with the second highest interest rate for a minimum investment of £500. The one-year Growth Bond is also among the top five most generous rates in the current market.”
On 1 December NS&I upped the rates on a number of accounts – including its Direct Isa and Direct Saver – by 0.25%. It also increased the prize fund rate on Premium Bonds by the same amount and the odds of a win are improved from 30,000 to 1, to 24,500 to 1.
