Budget 2017: Industry hits out at Hammond’s NS&I investment bond

Experts have hit out at the launch of the National Savings & Investments bond confirmed by the UK Chancellor in today’s Budget as too risky for consumers and not fit for purpose.

In last year’s Autumn Statement, the Government announced the creation of an investment bond open to everyone aged 16 and over, subject to a minimum investment of £100 and a maximum investment limit of £3,000, available from April.

The Treasury says the £3,000 limit is enough to cover the savings of over a half of UK households, especially those affected by low interest rates.

The Government has said today the bond will have a market-leading rate of 2.2 per cent over three years.

But Aegon UK head of pensions Kate Smith says the product is “little more than a sideshow” for people wanting to save for the long term.

She says: “The new bond will allow anyone from age 16 upwards to save a meagre £3,000 into the new Government product, at an interest rate of 2.2 per cent fixed for three years.

“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.”

At the time of launch last year, Hargreaves Lansdown chartered financial planner Danny Cox said the new bond is “a decent gesture” from the Government but given rising inflation “it’s unlikely money in this new bond savings will do anything but go backwards”.

Les Cameron, head of technical at Prudential, adds: “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 your savings work a little bit harder for you.”