Should I invest in NS&I savings bonds?
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I have received a letter from NS&I telling me that my growth bond is coming to an end and that I need to decide what to do with it. One option is to leave it where it is but I see that the interest rate has gone down considerably from what was on offer before. I’ve always used NS&I savings as the rates were better than most building societies, but am not sure if they are worthwhile now. What do you think?
Phil Beck of Smith & Pinching responds:
You are right that savings products from NS&I (formerly known as National Savings and Investments) have offered much better rates than most banks and building societies over the past few years. However, they made substantial cuts to their rates across all their variable rate products and some fixed-term products in November last year, as well as cutting the Prize Draw fund for Premium Bonds.
NS&I is government-backed and investors’ money is used to help meet the government’s funding requirement – which has hugely increased because of the Covid-19 crisis. For that reason, they postponed the cuts to their rates which were originally intended to come into effect earlier in the year. However, demand was very high last year and outstripped the target that had been set for new NS&I investment, largely because of the attractive rates.
NS&I products are intended to be competitive when compared to banks and building societies, so it was felt that a cut was needed to ensure fairness for both savers and taxpayers.
If you hold considerable sums in NS&I products, it may be worth reviewing your savings and investments and adjusting the mix. With government backing, NS&I products remain attractive as safe investments, but their rates – along with similar rates being offered for equivalent cash investments – struggle to keep pace with inflation and so your money may lose value in real terms.
There has been considerable change in the world of savings and investments over the past year and I would strongly recommend that you review all your financial provisions to ensure that they are still fit for purpose. An independent financial adviser will look at your complete financial situation and will make recommendations about what measures will be suitable for you.
Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information visit www.smith-pinching.co.uk
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