NS&I 2.2% savings bond: is it worth going for?

NS&I savings bond: Is it worth going for?

The NS&I fixed-rate savings bond has officially launched.

The three-year Investment Guaranteed Growth Bond, which offers a rate of 2.2% on deposits between £100 and £3,000, is expected to prove hugely popular with savers.

However, it falls short of the current 2.3% rate of inflation, meaning anyone who applies will see their money lose value in real terms in the short term at least.

What's more, the fact that it's an online-only account – the first such product from NS&I – will come as a blow to the 5.3 million adults who have never used the internet.

How it can be beaten

If you are chasing the best rate for your savings then the new NS&I Investment Bond can be beaten by eight other deals right now, which are set out in the table below.



Interest rate

Minimum deposit

Nationwide FlexDirect

Current account


£1 (max: £2,500)

Tesco Bank Current AccountCurrent account3%£1 (max: £3,000)

TSB Classic Plus

Current account


£1 (max: £1,500)

Bank of Scotland Classic Account with Vantage

Current account


£3,000 (max: £5,000)

Ikano Bank Fixed Five-Year Saver

Five-year fixed-rate bond2.35%£1,000

Milestone Savings Fixed Term Deposit

Five-year fixed-rate bond2.30%**£10,000

Secure Trust Bank Fixed Rate Bond 5 Year Term (Issue 31)

Five-year fixed-rate bond2.26%£1,000

Bank of London and the Middle East Premier Deposit Account

Five-year fixed-rate bond2.25%£25,000

*Rate will change to 2% on balances up to £5,000 from 11 June 2017
** Expected rate

Nationwide's FlexDirect account pays 5% on balances of up to £2,500, fixed for a year. The only condition is you need to pay in at least £1,000 a month.

Bank of Scotland's Classic Account with Vantage pays 3% on balances of between £3,000 and £5,000 so long as you pay in £1,000 a month and have two direct debits set up.

However, this rate will be cut to 2% on all balances up to £5,000 from 11 June 2017.

Tesco Bank's Current Account pays 3% on balance of up to £3,000, guaranteed until April 2019, provided you pay in £750 a month and set up three direct debits.

The TSB Classic Plus account pays 3% variable on balances of up to £1,500, but you'll have to credit the account with £500 a month.

Compare high-interest current accounts

Fixed-rate savings accounts

If you are after a fixed-rate and don't mind locking your cash away for a longer period, you can also get a better rate than the NS&I bond with a five-year fixed-rate savings account.

Ikano Bank has the highest rate at 2.35%. But while you can save more, it does offer less flexibility.

Unlike typical fixed-rate bonds, the NS&I Investment Bond allows early withdrawals, subject to a penalty of 90 days' interest.

If you have £3,000 invested that means you'd pay £16 to access your cash.

If you think rates are likely to rise and are wary of locking up your money for a long time the NS&I Investment Bond is a better option as Ikano Bank doesn't allow you to access your cash before the five-year term is over.

If you're willing to take on risk

All the above examples allow you to beat the NS&I bond's 2.2% rate completely risk-free, but if you are comfortable with risk you could get far better returns from peer-to-peer lending (P2P).

A quick look at the loveMONEY P2P best buy tables reveals you can earn 7% fixed for three years with the Assetz Capital Green Energy Income Account.

If you're happy to save for at least five years, investing in the stock market traditionally outperforms savings in the long run.

Compare returns from peer-to-peer lending

Vintage money-saving tips
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Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.

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