NS&I Cuts Bond Rates After High Demand

NS&I has cut the rates on two of its most popular bond products due to high demand.

Effective immediately, the three-year Guaranteed Growth Bond has been reduced from 2.2 per cent to 1.95 per cent, while the three-year Guaranteed Income Bonds are now paying out 1.9 per cent, down from 2.15 per cent previously.

The NS&I rate cut comes as the majority of banks start to increase the interest offered on their savings accounts, following a recent rise in the Bank of England’s base rate.

However, an NS&I spokesperson said that the rate reduction was not linked with the base rate increase, and was instead an attempt to “manage demand” after the bonds proved to be unexpectedly popular.

“Demand for the bonds in the first three months has been high,” said Jill Waters, retail director of NS&I.

“It is always a difficult decision to reduce rates but these changes will allow us to manage demand in order to achieve our net financing target, while continuing to deliver positive value to taxpayers.”

The rate cut will only affect new savers, meaning that existing bond-holders will still receive the higher returns that were offered to them when they first signed up.

Furthermore, 65+ Guaranteed Growth Bond holders will still be able to benefit from the higher rate on the three-year Guaranteed Growth Bonds, just as long as they opt to ‘roll over’ their bond savings before 10 April 2018.

However, some analysts have pointed out that there are still more competitive savings rates to be found on the wider market.

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“Pensioners may be relieved to hear that the chair isn’t being whipped away just as they go to sit down. However, they shouldn’t be tempted to settle for the 2.2 per cent on offer from the three-year Guaranteed Growth Bond. In the current market they can get up to 2.26 per cent over this period,” said Sarah Coles, a personal finance analyst at investment platform Hargreaves Lansdown.

“That’s assuming that a three-year fix is still the right option for them. When any fixed rate matures, it’s a valuable opportunity to revisit whether you need more flexibility, whether you want to fix for longer, and whether cash is the right place for this part of your portfolio at all.”

NS&I Bond Comparison

A Comparison of the current NS&I Bonds Available.
Name of BondTerm LengthMinimum InvestmentMaximum InvestmentBest ForInterest Rate
3 Yr Investment Guaranteed Growth Bond3 Years£1£3,000Safe compound interest at a fixed-rate. Only available until April 18th 2018 and only for a maximum of £3,000. 2.20% AER Fixed
3 Year Guaranteed Growth Bond3 Years£500£1,000,000Compound option at a fixed-rate. 1.95% AER Fixed
3 Year Guaranteed Income Bond3 Years£500£1,000,000Pays regular income. Can invest up to £1m safely. Fixed-rate. 1.92% AER Fixed
1 Year Guaranteed Growth Bond1 Years£500£1,000,000Taxable, paid gross. Compound option. Fixed-rate.1.50% AER Fixed
1 Year Guaranteed Income Bond1 Years£500£1,000,000Pays regular income. Can invest up to £1m safely. Only ties up money for 1 year. Fixed-rate.1.46 AER Fixed%
Income BondN/A£500£1,000,000Taxable, paid gross. Monthly income. Flexible with Easy access. 1.00% AER Variable
best investment rate
Last updated: March 13th, 2018

Kathryn Gaw

Kathryn Gaw is a financial journalist based in Belfast, Northern Ireland. She has been writing about personal finance and investment trends for more than a decade, and her work has been featured in the Financial Times, City A.M., the Press Association, and The Irish Independent, among many other publications.

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