One of the rabbits pulled out of chancellor Philip Hammond’s hat is the announcement of a new market-leading three-year savings bond.
It was widely predicted that chancellor Philip Hammond wouldn’t be pulling many ‘rabbits’ out of the hat when he stepped up to deliver his inaugural Autumn Statement.
True to form Mr Hammond resisted the temptation to offer a raft of ‘gimmicks’, but there were some surprises, including the announcement that National Savings and Investments (NS&I) will be launching a new market-leading savings bond.
The bond, which will have a three-year term, will offer an interest rate of 2.2%. This, however, may be adjusted to reflect market conditions when the product is launched in spring 2017.
Unlike NS&I’s popular Pensioner Bonds, which launched at the start of 2015, the bonds will be open to everyone aged 16 or over.
The maximum investment limit, however, is low at £3,000. Savers who invest the full amount will pocket £66 a year before tax.
The bond will be open to those aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000. The product will be available for 12 months from spring 2017.
It is unclear at this stage how many bonds NS&I will be able to sell. But Hammond seemed to suggest there shouldn’t be problems on the supply side, stating that he “expects around two million people to benefit”.
“Low interest rates have helped our economy recover, but they’ve significantly reduced the interest people can earn on their cash savings,” said Mr Hammond. “So we will launch a new, market-leading savings bond through NS&I.”
The new bond brings at least some positive cheer to the savings market. Over the past couple of years there has been a slew of cuts, with major banks and building societies cutting rates to the bone.
With the spectre of inflation returning in 2017 and predicted to hit 4% towards the end of next year, the landscape is going to become even tougher for savers.
"By next spring a 2.2% interest rate may not look appealing"
Charles Calkin, head of financial planning at James Hambro & Co, says: "The 'market-leading' new NS&I savings bond sounds more attractive than it is. The details won’t be announced until next spring, by which point a 2.2% interest rate may not look quite so appealing as it does today.
"The investment limit of £3,000 is not exactly going to make a huge difference to people who can already easily get 1.2% on a three-year savings product with some shopping around. It’s the equivalent of £30 a year extra."