You can earn 2.2% interest over three years with a new savings bond from NS&I. Here’s what you need to know about NS&I’s three year savings bond – and how to get it.
NS&I’s three year savings bond
Don’t be put off by the word ‘bond’ or that NS&I’s website describes it as an ‘investment guaranteed growth bond’. NS&I’s new savings bond is just a fixed rate, fixed term savings account. It pays interest at 2.2% if you leave your money in the account for three years. As I write this, it’s paying more than any bank or building society over three years.
Here’s what you need to know:
- You can save between £100 and £3,000. You have to pay the money in by debit card unless you’re transferring money from another NS&I account (see below).
- You have to be aged 16 or over.
- You can open and manage the account online. You can’t open or manage it by post or phone.
- You can take out the account in your name alone or jointly with one other person.
- Interest is worked out daily, and added to your account 12 months, 24 months and 36 months after you’ve opened it.
- Interest is paid gross (namely, without the tax taken off). However, interest isn’t tax free as it is with cash ISAs.
SAVVY TIP: If you receive more than £1,000 a year in interest from your savings (or £500 if you’re a higher rate taxpayer), you have to pay tax on the interest. Read more in Tax-free savings allowance explained; interest of up to £1,000 a year tax free .
- You can open an account for someone else if you have a power of attorney or a deputyship. You have to fill in an application form for attorneys or deputies.
- You can take your money out if you need to get to it. But you’ll have to pay a penalty equivalent to 90 days’ interest on the amount you take out. You must also make sure you keep at least £100 in the account at all times.
- You can transfer money from other NS&I accounts. If you want to switch you should download a switching form.
- You’ll get sent a statement every April showing you how much you have in the savings account and how much interest you’ve earned. You can receive this statement online or by post.
- 100% of your money is backed by the UK Treasury.
How NS&I’s three year savings account compares
As I write this, NS&I’s three year savings account is at the top of the best buy tables (I’ve checked Moneyfacts, Moneysupermarket and Savings Champion).
The next highest rate you can get is 2%, fixed for three years. This is from Secure Trust Bank. Your savings are covered by the FSCS (the UK savings compensation scheme) up to £85,000. The minimum amount you can save is £1,000 and the maximum is £1 million. You have to open the account online, but you can operate it online or by phone or post. You have to be 18 or over to open the account and, unlike the NS&I account, you can’t get at your money early.
OakNorth Bank pays 1.91% on a minimum amount of £1,000. It’s an online only account. The maximum you can save is £100,000. You can’t get early access to your money. It’s a UK based challenger bank which was given its banking licence in 2015. Your savings are covered by the FSCS (the UK savings compensation scheme) up to £85,000.
SavvyWoman email newsletters: If you found this information useful why not sign up now to receive free fortnightly email newsletters with money saving tips and help? You can sign up at the top of any page on the website and your details won’t be passed to any other company for marketing purposes.