Pensioner Bonds' interest slashed in half from Friday

The one year National Savings & Investment Pensioner Bonds mature on 15 January

It could be time to walk away from NS&I (Getty)

Several readers got in touch following my Saturday column about National Savings & Investment’s Pensioner Bonds. I pointed out that the one-year Bonds, launched by the Chancellor ahead of last year’s election, are coming to an end and if you don’t do anything, you’ll end up with the amount of interest you get slashed in half.

To start with, let me put at rest the minds of those with three year NS&I pensioner bonds who may have been alarmed by my article. I can confirm that the three year fixed rate bonds - which pay a very attractive 4 per cent - will, indeed, continue for their full three year term so you need do nothing at the moment.

But anyone with a one year bond needs to act fast as they mature on Friday this week. The market-leading 2.8 per cent paid out - which may have attracted you to invest in the government-backed savings scheme in the first place, will end and you’ll simply be switched to a fairly desultory 1.45 per cent rate.

I think this stinks and suggested that George Osborne may have deliberately launched the accounts to attract extra votes ahead of last May’s general election, but some readers disagreed. “The one year bond is no more than the name suggests and surely it’s no surprise that it has been cut,” said Bruce Hicks.

Malcolm Butcher went further. “I can’t believe that if you signed up for a 12 month term that you would expect it to continue at the same rate of interest after that period,” he said. “So, I don’t think that George Osborne was trying to con anybody, for a change.”

He’s right that you may not expect to the same rate after a fixed rate deal lasting a year comes to an end, but given that Osborne had claimed the bonds were designed to offer older people some “certainty”, I would have expected a similarly competitive rate to that which was offered ahead of the election.

The fact that the rate has been slashed in half is the kind of sneaky tactic you expect from a profit-hungry bank not a government-backed savings institution.

What are your options? If you want another one-year fix, Anna Bowes of SavingsChampion.co.uk says the best account at the moment is RCI Bank's one-year fixed-term savings account, which pays 2.06 per cent. But for those who are really safety conscious and want an account protected by the UK's Financial Services Compensation Scheme (RCI is French), the next best is Paragon Bank's one-year fixed-rate bond, which pays 2.01 per cent but can only be opened online.

If you're looking for a two-year fix paying more than the 1.7 per cent gross/AER offered on NS&I's two-year guaranteed growth bond (issue 51), there are also lots of options, says Ms Bowes. Al Rayan Bank pays 2.75 per cent, while RCI's two-year fixed-term savings account offers 2.35 per cent.

If you want the extra comfort of a UK-regulated institution, Axis Bank's two-year fixed deposit pays 2.27 per cent, while United Trust Bank's two-year tracker bond currently offers 2.25 per cent and guarantees to be 1.75 per cent above the Bank of England base rate.