Autumn Statement 2016 – NS&I to launch new savings bond… but is it any good?

CHANCELLOR Philip Hammond has announced a new savings bond in his Autumn Statement.

The National Savings and Investments savings bond will have an interest of around 2.2 per cent for up to three years - but with a maximum balance of £3,000, savers will only earn £198 in interest.

Hammond said the initiative, which he believes will benefit some 2 million people, is a response to low interest rates which have affected savers.

He said: "We can also help those who rely on income from modest savings to get by.

"Low interest rates have helped our economy recover, but they’ve significantly reduced the interest people can earn on their cash savings."

Andrew Hagger, founder of Moneycomms, said: “On the face of it this may seem like some much needed good news for beleaguered UK savers.

“However with the maximum balance permitted set at a paltry £3,000 savers would earn just £66 per annum or £198 over 3 years.

“It's hardly going to get savers rejoicing from the rooftops particularly as they will have to lock their cash away for three years.”

Currently, the market leader - Tesco Bank's UK FSCS protected 3 year fixed rate bond - generates £145.80 over 3 years.

The bond will be available from Spring 2017 to those aged 16 and over.

Martin Lewis, founder of MoneySavingExpert.com, said: "This new NS&I bond isn’t the Chancellor’s rabbit out of a hat, it’s more of a mouse.

“Unlike its predecessor, the pensioner bond, which allowed people to save up to £10,000 at up to 4 per cent for 3 years, this is £3,000 at a likely 2.2 per cent.

“You’ll be saving for 3 years, so that’s £66 in interest a year (ignoring any compound interest). The current best-paying 3 year fixed deal on the market is 1.62 per cent, so it’s an improvement. But actually, in the private market at the moment, it’s only an improvement of £18 a year.

“Certainly any account that beats the paltry rates of interest that we have currently is to be welcomed, but I don’t see many people whooping.”

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