The NS&I bond announced in last month's Spring Budget has been launched, offering a 2.2% rate on deposits over a maximum term of three years.
The bond will be available for purchase from now on for the next 12 months. It will be open to all people aged 16 and over and will be subject to a minimum investment of £100 and a maximum of £3,000.
This means if an investor were to put away the maximum £3,000, they would earn about £202.39 in interest after the full three-year period.
However, although the bond is being billed as "market leading", savings deposited in the bond will fail to keep up with rising prices, with UK inflation currently stood at 2.3% and projected to rise over the coming years, Hargreaves Lansdown has warned.
Chartered financial planner Danny Cox (pictured) explained: "If you look at it in isolation, a 2.2% bond over a three year period compared to what's available on the open market, then absolutely it's a market leading bond - you're getting a better interest rate and absolute security.
"The problem is the inflation rate of the year to March has just been announced at 2.3%, so actually on average prices are rising faster than this rate of inflation, even if you're getting this market-beating rate of 2.2%, your savings still aren't keeping pace with the rate of which prices are rising."
He added: "We're expecting inflation to rise further; the Bank of England thinks it's going to be 2.6% in the quarter, and then will rise to 2.8%."
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