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NS&I announces major shake-up to its Guaranteed Growth and Income bonds

Access to your deposits could be restricted from May

National Savings and Investments (NS&I) will re-issue its popular Guaranteed Growth and Income bonds later this year, but the way you can use the products will fundamentally change.

While customers investing in the bonds will have a 30-day cooling-off period at the start, they will no longer have the option to withdraw their funds early.

NS&I is a governmental body backed by the Treasury offering various investment and saving schemes, including popular premium bonds and a Junior Isa.

Which? looks at what the announcement means for savers and what returns are offered on these products.


What are NS&I Guaranteed savings bonds?

The NS&I’s savings bonds are similar to fixed-term saving accounts provided by many banks. You can opt for the interest to be paid either monthly or annually.

Customers invest their cash for a fixed term and the rate of interest they earn will stay the same for the full duration.

NS&I last relaunched the products in December 2017, which marked the first issue since December 2009.

To find out more see our guide on NS&I Guaranteed savings bonds.

How have NS&I Guaranteed savings bonds changed?

New issues of the one-year and three-year Guaranteed Growth and Income bonds will have revised terms and conditions from May 2019.

If you invest from this date onwards, you’ll benefit from a 30-day cooling-off period at the start of the investment should you change you mind.

However, you will no longer be allowed to withdraw your cash before the end of the term.

Previously, if customers wanted to withdraw cash before the term ended they faced a 90-day penalty on the amount they took out and were also required to keep a balance of at least £500 on the money invested.

NS&I said this type of early access is unusual for fixed term products, and so the change will align the bonds with the rest of the industry.

How much interest will I earn?

The current interest rates, and the maximum investment limit of £10,000 for both Guaranteed Growth Bonds and Guaranteed Income Bonds, will be unchanged.

A minimum deposit of £500 is also required to open your account.

Currently, the one-year Guaranteed Income Bond pays an interest rate of 1.46% AER, and the three-year Bond offers 1.92% AER.

The table below shows the current rates.

Type of product AER Interest paid
1-year Guaranteed Income bonds 1.46% Monthly
3-year Guaranteed Income bonds 1.92% Monthly
1-year Guaranteed Growth bonds 1.5% Annually
3-year Guaranteed Growth bonds 1.95% Annually


But these aren’t necessarily the best rates available on the market. You could earn up to 2.2% AER on the top-rated one-year fixed-rate bond currently on offer or up to 2.52% AER from the best three-year deal.

You can compare hundreds of fixed-rate savings products using Which? Money Compare.

What is the difference between the Guaranteed Growth and Income bonds?

The Guaranteed Income bonds are paid monthly into your bank account, typically on the 5th day of each month (or the next working day if the 5th is a weekend or bank holiday). With the the Guaranteed Growth bonds, by contrast,  that interest is paid annually on the anniversary of taking out the bonds.

So, if you invest £2,000 at 1.46%, you would earn interest of £29.20 by the end of the year, or £2.43 per month.

Why should you invest with National Savings and Investments (NS&I)?

Savers with NS&I have 100% security on money invested because the funds are backed by HM Treasury. This also means there would be no limit on the compensation you could claim if the NS&I went bust.

By contrast, savings accounts tend to be covered by the Financial Services Compensation Scheme, which provides compensation of up to £85,000 per provider.

So, if you have a large nest egg, the NS&I could allow you to save it all in one place with full protection.

Do you have to pay tax on the interest?

The interest you earn in both types of NS&I bonds is liable for tax and will count towards your personal savings allowance (PSA) for the year.

In the 2019-20 tax year, this is £1,000 for basic-rate payers and £500 for higher-rate payers, meaning you can earn this much in interest tax-free. Additional-rate payers will pay tax on all their savings interest.

You can find out more in our guide to the personal savings allowance.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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