The great pensioner bond rate drop: One-year fix will fall from bumper 2.8% to a paltry rollover rate of just 1.45%

Hundreds of thousands of savers who opened a 12-month fixed pensioner bond earlier in the year will see their rate tumble if they opt into one of National Savings and Investments rollover accounts, This is Money can reveal.

At the start of 2015 - just before the general election - the 65+ Guaranteed Growth Bonds came with a 2.8 per cent rate, with an opening balance limit of £10,000.

Pensioners rushed to gobble them up - £13billion poured into the Government-backed product, making it the biggest-selling financial product in Britain's modern history, according to the Treasury.

Pensioner pain: NS&I has revealed its rollover rates for its one-year pensioner bonds - 1.45%

With the accounts soon set to mature, NS&I has revealed the rates savers can opt into.

The one-year rate is 1.45 per cent, two-year 1.7 per cent, three-year 1.9 per cent and five-year 2.55 per cent - far lower than the attractive deals at the start of 2015.

It means the one-year rollover rate is 1.35 percentage points lower than the pensioner bond offering at the start of 2015 - while the three-year fix is some 2.1 percentage points lower. 

NS&I says savers can reinvest up to the total value of the maturing bond, including all interest earned.

Or savers can cash in some of the investment and reinvest the balance. However, they will not be able to add extra money to the account.

The short-term rates are lousy compared to what is currently on offer by challenger banks.

Since the summer, there has been a battle in the independent This is Money best buy fixed-rate savings tables, with a glut of better deals on offer.

In fact, the one-year rollover rate offered by NS&I is so low, it wouldn't feature in our table, beaten by at least 18 providers.

This includes the best buy rate offered by United Trust Bank at 2.15 per cent – some 0.70 percentage points higher than the new NS&I rate - and another five accounts paying interest of 2 per cent or more.

In terms of two-year deals, FirstSave has a 2.40 per cent rate – 0.70 percentage points higher than the NS&I rollover rate.

Al-Rayan Bank has the top three-year fix at 2.88 per cent, 0.98 percentage points higher than NS&I, while United Trust Bank have a five-year fix at 3.10 per cent – 0.55 percentage points higher than NS&I.

Popular deal: Pensioner bonds were snapped up by hundreds of thousands over 65s at the start of the year

Anna Bowes, of independent rate checking website Savings Champion, said: 'It's disappointing, although not wholly unexpected that NS&I is not offering another version of its 65+ Guaranteed Growth Bond.

'Instead it is offering a rollover into the current standard NS&I Guaranteed Growth Bond. These offer a wider choice of terms, but the rates are uncompetitive.

'Quite simply, much better rates can be found elsewhere so we would urge savers to move their funds – not simply roll the money over.

'By doing nothing the extra interest earned by investing in the first place, will be eroded by the poor rates being offered this year.'

An NS&I spokesman said: 'As with all our standard products, the interest rates on NS&I's Guaranteed Growth Bonds are set to balance the interests of savers, taxpayers and the wider market whilst offering a 100 per cent guarantee.'

The rate comes after we revealed last month that savers who took out pensioner bonds will be barred from withdrawing their money by telephone call.

NS&I changed the small print, which means anyone who took out one of these deals has to use the post or internet to get a payout.

It means that even savers who took one out over the phone using a debit card now can't simply give NS&I instructions over the phone to have their money and interest credited to a current account.  

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