The Government-backed NS&I announced that they will be making changes to some of their terms and conditions so that its investment range becomes more consistent and easy to understand. The popular Index-Linked Certificates, along with Fixed Interest Certificates and Children’s Bonus Bonds, will now come with exit penalties if customers wish to withdraw their money before maturity.
Children's Bonus Bonds are no longer available from the Post Office and will be re-named Children's Bonds. Children’s Bonds are now only available directly from NS&I, by post, telephone and online.
Before September 2012, parents missed interest on these bonds if they cashed it in during the first year. NS&I will now deduct 90 days' interest from the amount being cashed in if the bond has not reached maturity.
Customers with index-linked savings, who roll their money over into new certificates, now stand to lose 3.2% in returns from early withdrawals. NS&I savings certificates pay 0.25% above the retail prices index measure of inflation, which currently stands at 3.2%.
In the past, savers could cash in early after a year and it would only cost them the extra interest on top of the index-linked amount. This was a popular option for savers, because they could withdraw money from fixed accounts if they thought inflation would fall, or they needed the money early.
Now, customers removing their money early will leave with just 0.19% interest on the amount they withdraw for the year. The amount they withdraw will be stripped of 90 days' interest and index-linked returns.
John Prout, spokesperson for NS&I, said: “None of these changes impact customers until the end of an investment term. Even then we believe the changes will be of limited impact for most people and they need to take absolutely no action before they receive a maturity letter.”
Patrick Connolly, of AWD Chase de Vere, said: “While increasing exit penalties is never good news, the encashment terms previously offered were significantly better than their competitors and if anything were too generous, to the extent that it could encourage large numbers of investors to exit if their interest rates became uncompetitive. The exit penalty changes don’t apply to existing investors unless they roll over into a new product and they will be fully aware of all the facts before making any decision to do so.”