Blow to savers as NS&I cuts some three-year bond rates for new customers
Savers face a blow as NS&I has announced it has cut the rate on some three-year deals for new customers.
People taking out the three-year guaranteed growth bonds will now get a rate of 1.95% guaranteed for three years. The previous rate on offer was 2.2%.
Three-year guaranteed income bonds will now pay 1.9%, compared with 2.15% previously.
The changes affect new savers rather than those who already hold the bonds.
NS&I brought guaranteed growth bonds and guaranteed income bonds back on sale in December 2017.
The Treasury-backed organisation, which offers a range of savings and investments to 25 million customers, said there had been a high demand for the bonds.
Jill Waters, retail director at NS&I, said: "NS&I was delighted to bring these highly popular bonds back on to the market at the start of December and demand for the bonds in the first three months has been high.
"It is always a difficult decision to reduce rates."
She said the changes will allow NS&I, which has a duty to balance the interests of its customers as well as taxpayers and the wider financial services sector, to manage demand.
She continued: "The new rates present a fair offer, and customers continue to benefit from a high holding limit and 100% security on all deposits."
Savers need at least £500 to take out the deals and they can put away up to £1 million.
Customers who have maturing three-year guaranteed growth bonds and three-year 65-plus guaranteed growth bonds will be able to roll over their investment for another three-year term at a rate of 2.2% - as stated in their maturity pack - NS&I said.
Another product, investment guaranteed growth bonds, will remain on sale until Saturday with a 2.2% rate fixed for three years.
These bonds, available online only, are open to people aged 16 and over and have a minimum investment of £100 and a maximum investment of £3,000.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said: "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."
She said rates of 1.35% are currently available on easy access accounts for those who want to get their hands on their money quickly.
Those looking to put money away for five to 10 years may want to consider stock market investments, she suggested.
Ms Coles said: "This will put your capital at risk, but if you have a time horizon of five to 10 years or more, your money has more potential to grow than it would in a savings account."