What will the new government-backed savings bond mean for savers?
by Alexander Beard, on Feb 15, 2017 5:50:31 AM
Amongst a generally gloomy Autumn Statement, chancellor Philip Hammond offered a potential ray of hope for those looking to achieve better returns on their nest egg, thanks to the announcement of a new government-backed savings bond. Set to become available from spring 2017 through National Savings & Investments (NS&I) for those prepared to put their money away for three years, the bond will have an interest rate of 2.2%, making it a considerably better option than the current top rate three-year bond which offers just 1.63%.
Whilst the higher interest rate has been welcomed by many, the new bond has also been criticised for its low investment limit of just £3,000. Were you to invest the full amount in 2017, by 2020 you would have earned only a little over £200 in interest. When put alongside its predecessor, the pensioner bond, which allowed up to £10,000 to be invested at 4% interest for the same amount of time, the new bond pales in comparison somewhat.
However, there are reasons to consider the bond when it becomes available at the beginning of this year. As with any NS&I product, all money saved is entirely backed by the treasury ensuring your money is completely secure. Whilst pensioner bonds were more generous, they were limited to those aged 65 and over. In contrast, the new bonds have no age limit, meaning that many more people can take advantage of them.
It’s also worth considering the potential for financial uncertainty in the next few years, particularly as the formal Brexit process is set to be triggered in 2017. The government-backed bond could well be the best investment product available for the foreseeable future, so if you have cash you want to invest and you’re happy to leave it untouched for three years, it makes sense to generate as much interest from it as possible whilst you keep an eye on future investment opportunities for your money.