Published On: Tue, Sep 3rd, 2019

Pension warning for expats as expert fears triple lock to be lost after Brexit | Personal Finance | Finance

Banks and building societies are cutting returns on fixed-rate bonds and bond yields are falling, in anticipation of further cuts in interest rates. Absolute return funds used by many elderly savers have also disappointed, including the once hugely popular Standard Life Investments Global Absolute Return Strategies. It adds up to a perfect storm for savers and government-backed NS&I has made matters worse by withdrawing its one-year and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds from sale. 

Existing customers can still roll over their bond issues at maturity, as well as Fixed Interest Savings Certificates, but they will get 0.25 percent less. 

Guaranteed Growth Bonds now pay 1.25 percent over one year, rising to 1.45 percent over two years, 1.70 percent over three years and 2 percent over five years, with Guaranteed Income Bonds paying 0.05 percent less at every level. 

Existing savers whose bonds or certificates mature by October 5 can roll them over at the higher, older rate, unless they switch issue or term. 

NS&I retail director Jill Waters said it was doing this in response to falling rates from competitors, and “to balance the needs of our savers with taxpayers and the stability of the broader financial services sector”. 

She insisted the new rates will continue to offer a fair deal to customers, who also benefit from HM Treasury’s guarantee to protect 100 per cent of their savings. 

Hargreaves Lansdown personal finance analyst Sarah Coles said this was “incredibly disappointing” for loyal NS&I customers: “These will be savers who don’t want to move, for whom the 100 percent guarantee and ability to roll deals over are still significant attractions.” 

Coles said savers should check out what they can get from challenger banks, which pay up to 1.5 percent on easy access with fixed rates up to 2.75 percent (see best buy tables, page 36). 

This will come as little consolation for besieged savers, who can expect further bad news as interest rates around the world increasingly turn negative. 

Incredibly, a quarter of the world’s government bonds, worth $15trillion in total, now offer negative yields, which means savers are effectively paying for someone to look after their money. 

Rhona Macpherson, associate director at JCRA, said UK rates have not turned negative but that could change: “A no-deal Brexit may require radical action.” 

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