Savers will be offered a new government backed investment bond at the next Budget, the chancellor said today.
The three-year bond will offer a 2.2 per cent interest rate on deposits of up to £3,000, and will be available through NS&I.
It will be open to those aged 16 and over, available for 12 months from spring 2017.
The Treasury said the indicative rate is 2.2 per cent "but this may be adjusted to reflect market conditions when the product is launched".
The government said it was introducing the new bond to "support savers".
"The launch of the NS&I bond presents yet another savings option alongside pensions and lifetime ISAs which are competing for retirement savings," said KPMG pensions partner David Fairs.
"If we want an effective savings policy we need to significantly simplify savings products and the tax framework."
The Lifetime ISA, introduced by George Osborne in his final Budget as chancellor, offers people aged under 40 a rate of £1 for every £4 saved per year, up to a limit of £4,000.
And Danny Cox, chartered financial planner at Hargreaves Lansdown, said: "We saw from the popularity of the NS&I “pensioner” bonds introduced back in January 2015, how savers are desperate for a better return on their cash.
"With no end to low interest rates in sight a new bond aiming to pay 2.2 per cent over 3 years and a limit of £3,000 is a decent gesture, but with inflation rising and heading toward three per cent, its unlikely money in this new bond savings will do anything but go backwards."