Home Finance New British Savings Bond slammed as cynical 'marketing' ploy for one simple...

New British Savings Bond slammed as cynical 'marketing' ploy for one simple reason

Critics of the new British Savings Bonds have warned the Government-backed account is a “fancy marketing” ploy as the funds may not be directly invested in the UK economy.

The Bonds were pitched as “opportunities to save whilst supporting investment in the UK” when they were announced in the Spring Budget.

But experts have warned savers that their cash will likely go into a generic pot. Laura Suter, director of personal finance at AJ Bell, said: “The Chancellor announced the launch of the new savings bonds in the Spring Budget, hoping to capitalise on some patriotism across the nation to raise some more money for the Government.

“However, the Bonds are a fancy bit of marketing and aren’t actually any different to putting your money in other NS&I products.

“Despite being branded as ‘British Savings Bonds’ the money will go into the general government coffers, in the same way as other money raised by NS&I.

“The Government-backed provider has instead re-badged the previous Guaranteed Income and Guaranteed Growth bonds, issuing a three-year version of those accounts.”

Financial advisor Gary Bush, from MortgageShop.com, hit out at the choice of name as “a spin dcotor labelled attempt to put lipstick on a pig”.

He said: “The Government making these funds available to struggling British businesses to assist expansion would of course have made more sense but the Treasury, it seems, sees itself in greater need than the public.”

Information on the NS&I website about the newly launched accounts states that “your savings will be invested back into supporting the UK”. Express.co.uk has asked NS&I for comment.

The new Bonds have also been criticised for offering a relatively low interest rate of 4.15 percent AER (annual equivalent rate).

Sarah Coles, head of personal finance at Hargreaves Lansdown, told Express.co.uk: “This rate just isn’t going to be special enough to persuade swathes of new savers to tie their money up for longer.

“They may well be doomed by mid-table mediocrity. There are still three-year savings accounts on the market paying 4.65 percent, and you can get cash ISAs over three years paying up to 4.4 percent, which protect your savings from tax into the bargain, so there are plenty of more attractive homes for your money.”

However, Ms Suter said NS&I may have good reason for going for a mid-market interest rate. She explained: “NS&I said it wanted to price these bonds so they’d stick around, rather than selling like hot cakes, and this middle-market offering may just do that.

“It’s tricky for NS&I to get the interest rate right on these products: too high and they’ll attract swathes of cash and have to pull the accounts from sale, too low and savers will go elsewhere, meaning NS&I will have to crank up the interest rate later.

“This new launch effectively kills off the Green Savings Bond – which is the other three-year fixed rate bond from NS&I. The account funnels money into environmentally-friendly projects funded by the government, but it is only paying 2.95 percent interest.

“That means you’d have to be very passionate about green initiatives to opt for the Green Bond over the new British Savings Bond.”

One advantage of the new savings option is all the funds are backed by the Treasury and you can invest up to £1million.

This is well above the standard FCSC (Financial Services Compensation Scheme) protection for funds in savings accounts, which is up to £85,000.

Ms Coles said the accounts may appeal to those with “huge savings balances” but these more wealthy savers have other options to build up their savings.

She explained: “They can use a savings platform to spread larger sums across different banks. They can stay within the FSCS limit and see everything in one place, while still securing great rates.

“NS&I was going to have to offer something special to set the fixed rate savings market alight. Easy access savings are dominating at the moment, where savers can make more than five percent without any need to tie their cash up for longer.”


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