The government has released further detail on the NS&I investment bond, in light of the chancellor’s Budget speech today (8 March).
The Investment Guaranteed Growth Bond, which had initially been announced in the Autumn Statement, will offer a rate of 2.2 per cent before tax, with a three-year lock-in to avoid penalties.
Philip Hammond today confirmed that the bond will be available for 12 months from April this year, and said it will serve as a welcome break for hard-pressed savers.
Adrian Lowcock, investment director at Architas, said the NS&I investment bond will appeal to the many savers who like the security of a government-backed savings account, adding it was important to have some savings in cash.
However, Mr Lowcock questioned whether savers would be better off looking elsewhere for a better rate.
“Even though the NS&I Investment bond has one of the most competitive interest rates out there inflation is still expected to rise faster,” he said, pointing out that inflation for 2017 is expected to rise to 2.4 per cent and 2.3 per cent next year.
“This is a stark reminder that savers continue to suffer and interest rates on cash have not kept up with inflation.
“At the very least one key objective of any saver or investor should be to grow their money in line with, if not ahead of inflation to ensure you maintain the spending power of those savings.
“As such many savers will need to look to other, riskier, investments to potentially secure a higher return.”
Les Cameron, head of technical at Prudential, said: “Although this is a ‘no-risk’ investment, consumers should be able to generate two or three times that return by taking on a little exposure to investment risk.
“There are many lower risk solutions out there that could make you savings work a little bit harder for you.”
The bond is subject to a minimum investment limit of £100 and a maximum limit of £3,000.
katherine.denham@ft.com
