Pensioner bonds with National Savings and Investments “set to plummet”

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Pensioner bonds set to plummet! One year after savers were offered a deal of which the likes have not been seen since well before the days of the financial crisis, research from a leading money adviser has discovered that more people may be less than encouraged to put money into savings accounts because of the poor rates available in 2016.

The National Savings & Investments (NS&I) pensioner bonds, marketed as the 65+ guaranteed growth bonds when they were made available in January 2015, were initially a massive success, with just under half a million people signing up for the one-year deal that paid an impressive 2.8% interest.

However, Moneyfacts has highlighted the fact that when these pensioner bonds  matured on January 15th, savers with NS&I who did not migrate this bond were automatically transferred to another one of the company’s products, which pays nearly half of the original deal’s value – just 1.45%.

Moneyfacts went on to explain that savings rates, when measured by the average easy-access cash Isa rate, hit a “record low”; the typical Isa rate has dropped from 1.52% in January 2013 to 1.25% at the same point in 2015, then to 1.13% in 2015, and finally to 1.06% at the start of this year.

Charlotte Nelson, a finance expert at the organisation, said: “Many savers wanting to start building a nest egg will look towards highly flexible easy access savings accounts and ISAs, but anyone looking at the rates available today will perhaps question the benefit of saving at all.”

In light of the changes, Moneyfacts recommended that people may want to look at high-interest current accounts as a source of pensioner bonds saving. Should people only have a small amount of money they want to bank, a number of options on the market offer up to 5%, paying out “far more than even the best savings account on the market”.

Meanwhile, consumer champion Which? looked into alternative savings accounts on behalf of those affected. However, it was quick to underline that there are no one-year fixed-rate deals that are able to match the 2.8% AER originally promised by NS&I. It said the best deal on the table was the 2.12% AER given by a FirstSave 1-Year Bond, but to qualify, people would need another FirstSave product to get it. Otherwise, Aldermore and Bank of Baroda top the Which? Money Compare tables, as both offer deals of 2% AER.