Chancellor Philip Hammond plans to launch a new savings bond through National Savings & Investments to help savers in a low interest rate environment.
Announced in today’s Autumn Statement, the Government expects the savings and investment bond to have an interest rate of around 2.2 per cent gross and a term of three years. Further details will be announced at the Budget, Hammond says.
The bond will be open to those aged 16 and over with a minimum investment of £100 and a maximum investment limit of £3,000. The product will be available for 12 months from spring 2017.
Around 2 million people are likely to benefit from the scheme, Hammond says.
In August the bank rate was cut to 0.25 per cent from its already record low level of 0.5 per cent, after remaining at that level for more than seven years.
Hammond said: “Low interest rates have helped our economy recover, but they’ve significantly reduced the interest people can earn on their cash savings.”
Hargreaves Lansdown chartered financial planner Danny Cox says the new bond is “a decent gesture” from the government but with inflation rising and heading toward 3 per cent, “its unlikely money in this new bond savings will do anything but go backwards”.
He adds:”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.”