NS&I cuts savings limit from £1m to £10,000

National Savings & Investments (NS&I) has dramatically cut the savings limit on two of its most popular bonds in an effort to curb the huge demand for the products.

The maximum allowance on NS&I’s one and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds has been reduced from £1m to £10,000, effective immediately. However, the rates on these bonds will remain the same, with the Guaranteed Growth Bonds paying 1.5 per cent over one year and 1.95 per cent over three years.

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According to Jill Waters, retail director at NS&I, these products have been “extremely popular” with savers since they went on sale on 1 December 2017. However, the deposit limit will be a blow to conservative savers, who have struggled to find better savings rates from high street banks and Cash ISAs.

“We are pleased to have given savers over six months to invest larger amounts, but these changes to the investment limit will allow us to manage demand in order to achieve our net financing target for 2018-19, while continuing to deliver positive value to taxpayers,” said Waters. “The interest rates on both Guaranteed Growth Bonds and Guaranteed Income Bonds will remain unchanged and present a fair offer to savers. Customers who have invested previously will be able to renew existing investments at maturity at the purchase limit they purchased at.”

NS&I offers a 100 per cent security on all deposits, but each year the government sets an overall limit on the amount that can be held by in the government-backed bonds. In order to avoid overshooting its targets, NS&I has to either cut its rates or reduce the savings limit.

Existing savers who have already invested between £10,001 and £1m in the NS&I bonds will be able to keep their investments, and they can also opt to roll over their savings into a new NS&I bond when the current bonds mature. However, one analyst has warned that new savers would be better off looking elsewhere.

“Savers with a lot of cash loved these products, because they could save up to £1m in each, with a government-backed guarantee,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown. “If they are to save elsewhere, the first £85,000 is protected by the Financial Services Compensation Scheme, but if they have more than this, they need to spread their money around.

“New savers should look elsewhere for a better rate.”

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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.