NS&I say their 65+ Guaranteed Growth bonds can be redeemed early for the loss of 3 months interest. If that's true does it make the 3 year bond better than the 1 year bond?
The interest rate on the one-year bond is 2.8 per cent gross and on the three-year bond is 4 per cent gross. Both are highly attractive and beat other savings rates available elsewhere by a big margin. However, you are right that the three-year bond gives a better rate after one year than the 1 year bond.
Interest is added on each anniversary with basic rate tax taken off. NS&I has confirmed that if a three-year 65+ Bond was cashed in after one year the interest payable before tax would be 3.01 per cent gross: 4.00 per cent- 0.99 per cent (90 day interest penalty). Paid net of basic rate tax this would be 2.41 per cent.