Budget 2017: NS&I saving bond disappoints those looking for a decent return

Oliver Gill
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The return promised by the chancellor is better than what you can get from leaving your cash in a piggy bank (Source: Getty)

Savers on the hunt for a better rate of return may not be jumping for joy, after chancellor Philip Hammond failed to impress them with the launch of a National Savings & Investment (NS&I) three year bond that pays a 2.2 per cent return.

Labelling it a "welcome break for hard-pressed savers" in today's budget, Hammond came in for some stick from those hoping for more.

Kate Smith, head of pensions at Aegon said:

The government’s fanfare over the launch of the new NS&I bond is little more than a sideshow for those serious about long term saving.

Read more: Budget 2017: Eight expert predictions on pensions and savings

Meanwhile consumer champions laughed the initiative off the park on social media.

What the budget said: NS&I Investment Bond

The Budget confirms the rate on the NS&I Investment Bond announced at Autumn Statement 2016. The Investment Bond will offer a market-leading rate of 2.2% over a term of 3 years and will be available for 12 months from April 2017.

The Bond will be open to everyone aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000. At £3,000 the investment limit is enough to cover all the savings of over half of UK households.

This will support savers who have been affected by low interest rates.

Read more: Lifetime Isas: Treasury tinkering ticks off former pensions minster

Work harder

Man from the Pru Les Cameron, the insurance giant's head of technical, explained the 2.2 per cent return was both before tax and you needed to lock your money in for three years. He added:

Although a 'no-risk' investment, consumers should be able to generate two or three times that return by taking on a little exposure to investment risk.

There are many lower risk solutions out there that could make you savings work a little bit harder for you.

Smith said: "At this level, these savings are highly unlikely to keep up with inflation giving predictions of cost of living increases of 3 per cent or more in the coming years.

"It’s unlikely this product will prove as popular as the ‘pensioner bond’ launched for over 65s in 2015 which paid higher interest on considerably larger investments.”

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