Blow for savers as NS&I cuts maximum investment limits for new bond sales
Savers have been dealt a blow as NS&I has slashed the maximum amount that can be put into some new bonds from £1 million to £10,000.
NS&I said that, as of Monday, it has reduced the maximum purchase limit for new sales of one and three-year terms of Guaranteed Growth Bonds and Guaranteed Income Bonds, from £1 million to £10,000, or £20,000 for bonds held jointly.
The bonds have been "extremely popular" since they went on sale in December and the changes will help NS&I to meet its targets, the provider said.
The savings and Premium Bonds provider, which has 25 million customers, said the new lower limits only apply to new customers taking out the bonds.
Existing customers who have maturing Guaranteed Growth Bonds and Guaranteed Income Bonds are able to renew their investment and reinvest the full value of their holding into these issues.
The interest rates on offer with the bonds are unchanged.
For example, the one-year Guaranteed Growth Bonds pay 1.5%, while the three-year version pays 1.95%.
Both the one and three-year terms of Guaranteed Growth Bonds and Guaranteed Income Bonds are available to purchase online only through nsandi.com.
The bonds can be managed online, by phone and by post and are open to people aged 16 and over.
Money held with NS&I (National Savings and Investments) is 100% secure because it is backed by the Treasury.
NS&I has a duty to balance different needs and meet certain targets.
It has to balance the interests of three groups - customers by offering a fair rate; taxpayers by raising cost-effective financing for government; as well as the interests of the wider financial services sector.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said: "NS&I is in a unique position, because the Government sets targets for how much money it raises each year.
"Since these bonds were launched in December last year, they have attracted an enormous amount of cash, so it has made this move in order to avoid overshooting the target, without slashing the rate."
She continued: "£10,000 will be a decent limit for most people, but there will undoubtedly be those who are disappointed.
"The good news is that rates, particularly in the one-year market, have been rising recently, so they can get a better deal elsewhere.
"There are one-year fixed rate accounts paying interest at 2.05% and three-year fixed-rate accounts paying 2.31%."
Jill Waters, retail director, NS&I, said: "Guaranteed Growth Bonds and Guaranteed Income Bonds have been on sale since December 1 2017 and have proven extremely popular.
"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.
"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."