MSE News: NS&I launches 'British Savings Bonds' – but you can get better rates elsewhere

MSE_Petar

NS&I has launched its 'British Savings Bonds' – three-year fixed rate savings accounts first announced by the Chancellor in his Spring Budget last month. But they'll only pay 4.15% AER – a rate you can easily beat elsewhere.

Read the full story:
'NS&I launches 'British Savings Bonds' – but you can get better rates elsewhere'

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eskbanker

The article states that "the British Savings Bonds can be beaten even by shorter-term fixes" but shows a table clearly illustrating that fixed rates are currently declining, i.e. the longer the term the lower the rate, so it's entirely unsurprising that longer fixes can be beaten by shorter ones!

TheBanker

eskbanker said:

The article states that "the British Savings Bonds can be beaten even by shorter-term fixes" but shows a table clearly illustrating that fixed rates are currently declining, i.e. the longer the term the lower the rate, so it's entirely unsurprising that longer fixes can be beaten by shorter ones!

Indeed - the rate's not actually that bad when compared to other three year fixes. The article rather misses the purpose of a three year fix by comparing it to instant access accounts with rates that could drop next week!

If someone had a large sum, and didn't want the hassle of splitting it across multiple banks to stay within the £85k FSCS limit, this would be a decent choice. Appreciate that's a bit of an edge case though.

EdSwippet

TheBanker said:
Indeed - the rate's not actually that bad when compared to other three year fixes. The article rather misses the purpose of a three year fix by comparing it to instant access accounts with rates that could drop next week!

The apples-to-oranges comparison in the article is definitely unhelpful, if not totally misleading.

However, there are currently seven three-year bonds shown on Money Supermarket. Every single one of these offers a higher interest rate than NS&I's British Savings Bonds. Given this, saying that NS&I's rate is "not actually that bad" appears rather generous.

TheBanker said:

If someone had a large sum, and didn't want the hassle of splitting it across multiple banks to stay within the £85k FSCS limit, this would be a decent choice. Appreciate that's a bit of an edge case though.

Certainly the only case for which I'd consider these bonds. Even so, it would have to be a significant amount; that is, more than I could put into all seven of the aforementioned better-paying competitor products combined!

wmb194

Looks like this rate roughly matches those of three year gilts, which makes sense. I’d prefer to own the gilts because at least you can sell them during the term should you so choose.

Malthusian

eskbanker said:

The article states that "the British Savings Bonds can be beaten even by shorter-term fixes" but shows a table clearly illustrating that fixed rates are currently declining, i.e. the longer the term the lower the rate, so it's entirely unsurprising that longer fixes can be beaten by shorter ones!

It's unsurprising to anyone who knows how yield curves work and why they might invert, but I think the average saver might still be surprised to find that you get a lower interest rate for tying up your money for longer.

It's not even as if interest rates are actually falling, they're just expected to.

CadburyPurple

If you're a highest rate tax payer and have no personal savings allowance, is this another way to have untaxed interest? Or is interest taxed on this account (unlike premium bonds)? 

eskbanker

CadburyPurple said:

If you're a highest rate tax payer and have no personal savings allowance, is this another way to have untaxed interest? Or is interest taxed on this account (unlike premium bonds)? 

Is the interest taxable?

Yes, in the tax year your Bond matures

https://www.nsandi.com/products/guaranteed-growth-bonds

Is the interest taxable?

Yes

https://www.nsandi.com/products/guaranteed-income-bonds