Belfast Telegraph

Hard-pressed savers offered help with new market-leading bond

Hard-pressed savers have been offered some help in the Budget as the Chancellor announced that a new market-leading bond will be launched next month.

NS&I (National Savings and Investments) will offer a new three-year investment bond with a rate of 2.2% from April.

But some experts described the rate as "disappointing", and said savers taking out the deal could still struggle to achieve real returns.

The bond was previously unveiled in the Autumn Statement, with Chancellor Philip Hammond confirming the rate on Wednesday.

The deal will be available for 12 months from April and it will be open to savers aged 16 and over who want to save between £100 and £3,000 over the next three years.

Experts said the fixed-rate savings market generally has seen some improvements since the deal was first announced in the Autumn Statement.

At that time, the best paying three-year bond had a rate of 1.63%.

Rachel Springall, a finance expert at website Moneyfacts, said NS&I's 2.2% rate matches a three-year bond rate now on offer from Atom Bank, which also pays 2.2%.

She said: "With Atom Bank savers can invest from £50 and all the way up to £100,000, whereas NS&I has a much lower upper limit of £3,000."

For savers who want to put money away for five years, Atom Bank also has a deal paying a higher rate of 2.4%, she said.

Ms Springall said that with rising living costs expected to have a growing impact in the coming months, it is going to be very difficult for savers with money sitting in a cash account to get a decent return in the years ahead.

Kate Smith, head of pensions at Aegon UK, described the £3,000 limit on the new bond as "meagre".

And Maike Currie, investment director for personal investing at Fidelity International, said: "While this may be a market-leading rate, anyone saving into the new investment bond will struggle to achieve a real return."

Anna Bowes, director of website, said: "It's welcome news that the new NS&I bond will be launched in April but disappointing that the rate is not higher, given the improvements in the wider market in the time since the bonds were originally announced, in the Autumn Statement last year."

She continued: "Of course, any better paying accounts in the current climate is good thing and with the positive movements we've been seeing in the savings market in recent months, we wouldn't be surprised if more challenger banks quickly catch up and beat the rate on offer from the NS&I bond."

NS&I is backed by the Treasury, so money held with it is 100% secure.

Budget documents said that, at £3,000, the investment limit is enough to cover all the savings of more than half of UK households, with 52% holding total savings and investments of between zero and £3,000.

The documents also pointed to other savings reforms, including the introduction of the personal savings allowance in 2016 which means that 98% of adults across the country now pay no savings tax.

Next month will also see the launch of the new Lifetime Isa, enabling the under-40s to save up to £4,000 per year and receive a bonus of up to £1,000 per year on these contributions. Money saved into a Lifetime Isa can be used to buy a first home or for retirement.

An exact date in April for the launch of the new NS&I bond has not yet been given.

Former pensions minister Baroness Altmann said the Budget contained "no proper help for savers," and with inflation expected to move higher than 2.2%, savers could lose money in real terms as the growth in the value of their savings would be overtaken by the growth in living costs.

Office for National Statistics (ONS) figures show the Consumer Price Index (CPI) measure of inflation was at 1.8% in January.

Economists have predicted the rate will edge higher in the coming months as rising import costs are passed on to consumers.