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NS&I explains how British Savings Bonds funds will be used after ‘marketing’ criticism | Personal Finance | Finance

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NS&I has responded to concerns about how funds in the new British Savings Bond will be used.

Analysts at AJ Bell that the name of the was a “fancy bit of marketing” with the Chancellor trying to “capitalise on some patriotism” when in reality the funds would go into a generic pot.

Information on the NS&I website states that funds in the accounts, which are a new issue of the existing Guaranteed Growth Bonds and Guaranteed Income Bonds, will be “invested back into supporting the UK”.

reached out to NS&I for more information about how savers’ funds will be used.

A spokesperson said: “NS&I provides cost-effective financing for Government and the public good by offering trusted savings and investment propositions while supporting a fair and competitive market and balancing the interests of our savers, taxpayers and the market.

“We raise public finances sustainably and efficiently. HM Treasury allocates how money raised through NS&I products is invested back into supporting the UK.”

The Treasury declined to comment when asked how funds from the British Savings Bonds will be used.

The new Bonds have also been criticised for their relatively low interest rate, at 4.15 percent AER (annual equivalent rate).

Sarah Coles, head of personal finance at Hargreaves Lansdown, told : “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, Laura Suter, from AJ Bell, said NS&I’s choice of rates may be vindicated over time. 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.”

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