National Savings & Investments’ three year ‘pensioner bonds’ will begin maturing from 15th January and, unless they act fast, account holders will see their money automatically reinvested for another three years.
The 65+ Guaranteed Growth Bonds were issued in 2015 and promised a 4% rate of return to anyone who invested. The bonds were open to anyone aged 65 or over, with an upper investment limit of £10,000. They quickly became one of NS&I’s most popular savings products, attracting some 900,000 investors. They are all due to mature between 15th January and 15th May this year.
Once the bonds mature, savers will have the option to either withdraw the full sum in cash to either hold or reinvest, or to leave it, in which case NS&I will automatically reinvest it in the latest iteration of the Guaranteed Growth Bond. However, this latest iteration comes with an interest rate of 2.2%, rather lower than the 4% offered on the initial bond, which may disappoint some savers.
However, despite the drop, the current savings climate means that 2.2% is still a very competitive rate of interest. Interest rates are low all over at the moment and, for a fixed deal of similar length, you’d struggle to get much better than this NS&I offering.
With an easy access account, savers would be looking at returns rather lower than those offered by NS&I – for example the AA’s bonus saver account currently pays out interest at 1.32% pa, and that’s only for a year, after which it drops down to 0.2%.
The NS&I Guaranteed Growth Bond does allow savers to withdraw their funds, but they will face a penalty fee equivalent to 90 days’ worth of interest if they do so. For many, this hit is not particularly problematic, and the fact that the option exists to withdraw is a mark in the bond’s favour.
If you have an NS&I Guaranteed Growth Bond that is set to mature, you will receive notification from NS&I no fewer than 30 days in advance of the maturity date. In order to withdraw the funds, you’ll need to let them know either by post or online – they recently announced that they will not accept requests over the phone.
For the most part though, experts are leaning towards advising customers to leave their money with NS&I (so long as they are OK with it being tucked away for a while). But, as always, its important to shop around and check if there are any other savings accounts that look preferable, particularly those with shorter terms. It’s also worth looking at ISAs, which offer tax exemption on interest. While the actual rates are invariably lower, in some cases, the tax exemption can make a big difference.