Business

Doubts over new 'leading' savings deal announced in Budget

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A "market-leading" savings deal - announced by the chancellor in the Budget - is likely to be bettered soon, experts suggest.

Philip Hammond said a three-year bond will be offered through National Savings and Investments from April.

It will pay interest of 2.2% a year - matching the best return offered on the open market.

Yet, recent improvements in the best deals led commentators to suggest a better rate would come soon.

"The new bond will mean savers can earn up to £202 in interest over the three year term," said Anna Bowes, of director of independent advice website, SavingsChampion.

"With the positive movements we've been seeing in the savings market in recent months, we wouldn't be surprised if more challenger banks quickly catch up and beat the rate on offer from the NS&I bond."

'Underwhelming'

The Investment Guaranteed Growth Bonds will be open to those aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.

Savers are expected to lock in their money for three years. Anyone accessing their money early will be charged a penalty equal to 90 days' interest on the amount cashed in.

Some critics have already labelled the product as a "sideshow" and "underwhelming", in part because official forecasts estimate that the cost of living will rise at 2% or above for the next three years.

Comparison website Moneyfacts said that a savings deal with the same rate of interest allows savers to deposit up to £100,000, although it does not have the same government security.

The Treasury, in the Budget documents, said that the majority of savers had limited funds to save. Some 52% of UK households hold total savings and investments of £3,000 or less, government data shows.

"This will support savers who have been affected by low interest rates," the Treasury said.

Sean McCann, chartered financial planner at NFU Mutual, said: "Small print from the Treasury revealed that the majority of households have no more than £3,000 tucked away for a rainy day. This shows how exposed the majority of UK households are to accident or illness curtailing their ability to work and earn a living."

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