Bank of England
A new government savings bond, offering a market leading rate of 2.2%, has been launched today Reuters

A new government savings bond, offering a market-leading rate of 2.2%, has been launched on Tuesday (11 April).

The Investment Guaranteed Growth Bond was first announced by the chancellor in last year's Autumn Statement, and will be sold by state-owned NS&I.

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Savers can put between £100 and £3,000 into the deal and the 2.2% rate is fixed for three years. The online-only bond will be on sale at nsandi.com for the next 12 months.

The return beats the best three-year bond advertised on the Moneyfacts personal finance website, which is currently 2%, but is still below the current Consumer Price Index (CPI) rate of inflation at 2.3%.

Chancellor Philip Hammond launched the bond last November and said two million people were likely to benefit from the savings product.

Savers have suffered low rates of interest since the financial crisis, with further cuts made following the Bank of England base rate falling to 0.25% in 2016.

Anyone depositing £1,000 can expect to earn about £67 in interest, if they make no withdrawals over the three-year period. Those investing the full amount of £3,000 can expect to make about £202.

NS&I, which has 25 million customers, sells premium bonds, and previously offered popular pensioner bonds.

Rising inflation

Economic Secretary to the Treasury Simon Kirby said: "From raising the Isa threshold to introducing the new Lifetime Isa, this government is committed to creating a nation of savers.

"With its market-leading rate of 2.2%, the investment bond will provide a valuable boost for savers who have been affected by low interest rates."

But Danny Cox, a chartered financial planner at Hargreaves Lansdown, said: "As market-beating as the 2.2% rate is, it still falls short of price inflation and this gap is likely to widen over the next few months.

"Undoubtedly it will be popular not least because of the Treasury backing and, unlike the pensioner bond of 2015, this savings bond is available to everyone aged 16 and over, and for a full year."