Hot on the heels of the recent announcement from NS&I that the Premium Bond prize fund rate and the easy access account rates are to be cut from December, as we have come to expect, the state bank has followed this by dropping the rates available on the Fixed Term Guaranteed Income and Growth Bonds – also known as the British Savings Bonds.
Added to that, the 5-year Bond has been withdrawn from general sale, although it is still available for those with maturing bonds.
Are these new bonds competitive?
The new interest rate on the 2-year Growth option is 3.60% gross/AER, and the Income option is 3.54% gross / 3.60% AER – down from 4.10% AER/4.02% monthly.
The new rate on the 3-year Growth option is 3.50% gross/AER, and the Income option is 3.44% gross / 3.49% AER, down from 4% AER/3.95% monthly.
The rates on the 1-year and 5-year bonds have also been cut, although these terms are only available to those with existing bonds that are maturing.
The new 1-year rate is just 3.95% AER/3.88% monthly, down from 4.35% AER/4.26% monthly, whilst the 5-year bond is now offering 3.40% AER/3.34% monthly, down from 3.90% AER/3.83% monthly.
The new rates are disappointing, but the good news is that there are rates available from the rest of the market that are better than even the previous higher NS&I rates, as the table below shows.
In fact on a balance of £50,000 you could be missing out on over £500 a year!
So, these cuts could encourage savers to shop around to earn more.
That said, as you can put up to £1m into each issue of these bonds, some people would prefer to accept a lower rate, in order to minimise the hassle of opening multiple accounts to keep the cash protected. NS&I is unique because it is fully backed by HM Treasury. This government guarantee means that 100% of any money you invest with NS&I is safe, no matter how much you save. That said, other banks or building societies, are protected by the Financial Services Compensation Scheme (FSCS) up to a limit of £85,000 per person per institution, so for those with less than £85,000 or prepared to open multiple accounts, NS&I may not be the first choice.
However, the rise of the cash savings platforms has added another option for those with larger amounts of cash.
Think of a cash savings platform like a savings supermarket, where with a single application and log-in, you can pick and choose multiple competitive savings accounts - from easy access to fixed term bonds - and providers at the click of a button. Whilst not whole of market, cash platforms do make it easier to spread your cash, so that it can be better protected by the Financial Services Compensation Scheme (FSCS).
@savingschampion
Find us on Facebook