You might’ve missed it, eclipsed by the uproar over national insurance contribution hikes for the self-employed, but Philip Hammond’s Budget 2017 did offer some help for savers who are feeling the pinch.
This is all down to the new market-leading bond which is going to be available as of April, offering savers a 2.2% interest rate for a three-year bond. The 2.2% rate directly matches the current market leader – a three-year bond from Atom Bank which has similar terms, with one key twist. Where Atom Bank are making their 2.2% rate available for investments from £50 all the way up to £100,00, the bond announced by Philp Hammond has an upper limit of just £3,000.
While that means that this won’t be available to higher-sum investors, it also indicates that the focus is on those savers who have smaller amounts to put away and can do with the extra boost. On the one hand, sceptical experts are suggesting that savers will struggle to see any real return with these bonds, especially considering the £3,000 limit – on the other, research seems to show that this limit will be ample for over half of all UK savers, with 52% of household savings sitting at under three grand.
The 2.2% rate itself has been described as disappointing and ‘meagre’ by several experts, who cite the fact that the market has picked up in recent months – and the offering of higher rates from companies like Atom Bank – as reasons for wishing that the Government could have delivered a higher rate. This may simply be because the idea was originally announced as part of 2016’s Autumn Statement, when the market was in a worse position and the rate now on offer would have seemed a far more attractive proposition.
All that said, the response has certainly been positive overall. Anna Bowes, for instance, from the Savings Champion website has said that:
“Of course, any better paying accounts in the current climate is good thing and with the positive movements we’ve been seeing in the savings market in recent months, we wouldn’t be surprised if more challenger banks quickly catch up and beat the rate on offer from the NS&I bond.”
So, will this offer – available from NS&I, and therefore backed by the treasury – be the right choice for you? A fixed bond differs from many other types of saving in that it runs for a set term, so once the money is invested savers need to wait for the term to end until they can access their cash. This means that the chancellor’s announcement isn’t necessarily going to be helpful for those with less stable income, who may need the security of knowing that their savings can be released.
Anybody with a little more stability, though, who has been looking for a fixed bond deal with a reasonably low upper limit, is going to find this difficult to beat over the coming months, especially if you only want to be tied in to the relatively short 3-year period.
Of course, however you choose to invest your money, the most important thing is to do the research and make sure your own circumstances, and not general trends, are the driving force behind your decision.