Pensioners are being urged to check their maturing savings accounts with National Savings and Investments (NS&I) to ensure their money is not transferred to a new product with a lower rate of interest automatically.
More than 885,000 pensioners opened a three-year 65+ Guaranteed Growth Bond – dubbed ‘pensioner bonds’ - with NS&I between 15 January and 15 May 2015.
There is around £10 billion in these accounts, which will be maturing in the next few months, but pensioners need to act if they do not want their funds to be transferred to a lower paying account.
The 65+ Guaranteed Growth Bond currently pays 4 per cent interest but bondholders will have their money rolled over into NS&I’s three-year Guaranteed Growth Bond automatically, which pays just 2.2 per cent.
While this rate of interest is competitive in today’s market, it is lower than the Moneywise Best Buy – the Access Bank UK Sensible Savings Three Year Fixed Term Savings Bond, which pays 2.25 per cent and comes with Finance Services Compensation Scheme protection up to £85,000.
Customers who do not want to see their cash automatically transferred to the new bond on maturity should contact NS&I to arrange to transfer the funds elsewhere. Customers will receive a letter from the provider 30 days before maturity and must reply to this letter or visit the NS&I website to arrange a transfer, which will take place when the account matures.
If customers do not move their money and are rolled onto the new product, they can withdraw funds from the new product but will pay a penalty of 90 days’ interest.
Anna Bowes, director at independent savings advice site Savings Champion, says: ‘Savers who have been enjoying 4 per cent are clearly going to be disappointed that on maturity their return will drop by at best over 43 per cent, as the best three-year rate on the open market is paying just 2.25 per cent gross/AER.
‘However, as the NS&I automatic rollover option is very competitive, it may not be worth moving the maturing money elsewhere for those savers who want to tie up their money for another three years. Especially as there is an option to access the funds early, if necessary, with a penalty equivalent to 90 days interest on the amount to be withdrawn.
‘However, if they do want earlier access or a monthly income, it is sensible to consider moving from NS&I, to make the money continue to work as hard as possible – as there are better equivalent options elsewhere.’
This article was originally written by our sister website Moneywise.
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