NS&I launches two new savings accounts that are ‘likely to sell quickly’ (Image: GETTY/NS&I)
NS&I has increased the choice available for savers looking for interest-rate security with the launch of two new fixed British Savings Bonds. The savings institution has also raised the interest on its existing three-year fixed British Savings Bonds account.
British Savings Bonds are fixed-term Issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.
Guaranteed Growth Bonds are a lump sum investment that earns a fixed rate of interest over a set period of time. These accounts are designed to be held for the full term. Interest is calculated daily and is added to the Bond on each anniversary of the investment.
Meanwhile, Guaranteed Income Bonds are accounts that require a lump sum investment and provide monthly income at a fixed interest rate over a specified term. Interest is calculated daily and paid into the customer’s nominated bank account.
The first of the two new fixed accounts, the two-year Growth option, offers savers 4.6 percent gross/AER, and the Income option offers 4.50 percent gross/4.60 percent AER.
NS&I is one of the largest savings organisations in the UK (Image: NS&I)
Savers investing in the five-year Growth option will receive 4.1 percent gross/AER. The Income option offers 4.02 percent gross/4.1 percent AER.
The interest rate on the existing three-year British Savings Bonds is also increasing for new investors to 4.35 percent gross/AER, and the Income option offers 4.26 percent gross/4.35 percent AER.
Commenting on the new deals, Dax Harkins, chief executive at NS&I said: “It is 15 years since we last had two- and five-year fixed-term Bonds on general sale to new investments.
“The two new Issues, along with a rate increase for our three-year Bonds, provide NS&I savers with increased choice and longer-term security in a changing market.
“The changes will help us meet our Net Financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector.”
The two, three and five-year fixed-rate Growth and Income Bonds are open to savers wishing to fix at a guaranteed rate for the whole term.
Savers will need a minimum investment of £500 and can invest a maximum of £1million in each Issue. After the fixed-term period, savers will have the choice to withdraw their cash or reinvest into a new term.
The two and five-year fixed-rate Guaranteed Growth Bonds and Guaranteed Income Bonds were last on general sale to new investments in October 2009.
The one-year option is only available to existing customers with maturing products and is not open to new customers.
Commenting on the new deal, Sarah Coles, head of personal finance at Hargreaves Lansdown added: “NS&I is going for a Goldilocks boost to the British Savings Bond. It wants to attract more cash to hit a slightly more generous fundraising target, but it doesn’t want to go too far and bust the limit like last year.
“Middle-of-the-road rates on less popular savings accounts are a sensible solution.”
Laura Suter, director of personal finance at AJ Bell, said: “The popular British Savings Bonds are back on sale – and despite offering less interest than the market leader, they are likely to sell quickly once again. NS&I has launched a two and five-year version of the bonds, as well as raising the interest rate on the existing three-year version.
“The one-year version of these bonds that went on sale in Autumn last year sold rapidly, selling out in five weeks, and the bonds raised over £10billion of the total £11.3billion NS&I raised in the last financial year. More than a quarter of a million customers clamoured for the one-year version of the accounts, which paid 6.2 percent.”
However, Ms Suter noted: “The interest rates on these new bonds aren’t as enticing. There are a number of providers in the market offering higher rates.
“The top two-year fixed rate account in the market pays five percent compared to the 4.6 percent on offer from NS&I. It’s the same case with the five-year bonds, where the market leader is paying 4.55 percent, compared to the 4.1 percent from the British Savings Bond.”
Regardless, Ms Suter continued: “These accounts are likely to be very popular as they are backed by NS&I and many savers have huge brand loyalty to the organisation. There are around 550,000 existing bond accounts held by NS&I customers, with an average investment of almost £52,000 in each account.”
NS&I is one of the largest savings organisations in the UK, offering a range of savings and investments to over 24 million customers. All products offer 100 percent capital security as NS&I is backed by HM Treasury.
