Chancellor Philip Hammond today unveiled a new savings bond with a guaranteed 2.2 per cent rate and re-committed to increasing the personal allowance to £12,500 by 2020. However, commentators said this would do little for savers.
The chancellor announced a new three-year NS&I bond with a rate of 2.2 per cent, with contributions starting from £100 and capped at a limit of £3,000. The bond will be available for 12 months from spring 2017. It follows on from the hugely over-subscribed so-called 'pensioner bonds' launched in 2015 but, unlike those, these bonds will be available to all savers aged 16 and over.
Commentators criticised the rate of return as offering little to savers after inflation. But the chancellor has said the rate could be adjusted according to market conditions at launch.
Mike Gordon, technical director at Rutherford Wilkinson, said: "With a maximum limit of £3,000, it is hardly rewarding for investors, with only £66 a year earned in interest. While the chancellor said two million people are due to benefit, we must remember the NS&I website crashing due to demand for pensioner bonds and so we shouldn't hold our breath on these."
Calum Bennie, savings expert at Scottish Friendly, said: "For savers, the forthcoming savings bond is better than nothing, but an interest rate of 2.2 per cent is hardly likely to set the heather alight at a time of increasing inflation."
The chancellor also today confirmed that the tax-free personal allowance would rise to £12,500 by the end of Parliament and increase the higher rate threshold to £50,000. When the personal allowance has reached £12,500, it will continue to rise by the rate of consumer price index inflation rather than with the national minimum wage currently planned. However, he said it would be up to the chancellor's discretion whether further changes would be affordable after 2020.
