A new 2.2 per cent savings bond, which was first teased by Philip Hammond during his Autumn Statement speech last year, has officially launched today.
The bond, which will be on sale exclusively online for the next year and is known as the Investment Guaranteed Growth Bond, will allow people to invest between £100 and £3,000 and is fixed for three years. It is available to those aged 16 and up.
"With its market-leading rate of 2.2 per cent, the investment bond will provide a valuable boost for savers who have been affected by low interest rates," said Simon Kirby, economic secretary to the Treasury.
Figures from the Treasury note the average three-year fixed product on the market offers an interest rate of a mere 1.24 per cent.
Last August, the Bank of England cut the base rate to a historic low of 0.25 per cent. Prior to this, the rate had remained static at 0.5 per cent since 2009.
"Since the Brexit vote, savers have been squeezed further with the interest paid on the average cash Isa halving," said Danny Cox, chartered financial planner at Hargreaves Lansdown. "The new NS&I bond provides some conciliation, however as market beating as the 2.2 per cent rate is, it still falls short of price inflation and this gap is likely to widen over the next few months.
"Undoubtedly it will be popular not least because of the Treasury backing and, unlike the pensioner bond of 2015, this savings bond is available to everyone aged 16 and over, and for a full year."
Cox added those who were hoping to buy their first home would likely be better off with the lifetime Isa, which benefits from a 25 per cent top up from the government on savings of up to £4,000 per year. The lifetime Isa was announced in George Osborne's Budget last year.