IN A MOVE he described as providing a “welcome break for hard-pressed savers” the Chancellor confirmed the interest rate on the new National Savings & Investments bond he unveiled in his Autumn Statement will be set at 2.2 per cent.

Savers will be able to deposit a maximum of £3,000 a year into the bond, which launches next month and has a three-year term.

While Philip Hammond hailed the bond’s market-leading rate, Saga director Paul Green said the low investment limit meant the bond is unlikely to provide a meaningful boost to the millions of savers who rely on interest to provide them with an income.

“The Budget has given no comfort to older savers, many of whom rely on interest from their savings to boost their retirement income. There was no reassurance for them their savings income would start to pick up again any time soon,” he said.

“The confirmation of the new rate for the NS&I bond at 2.2 per cent is alongside some of the best in the market but, with an investment limit of just £3,000, this is not going to provide any significant income for anyone.”

According to price comparison site MoneySuperMarket, the best rate currently available on a bond in the open market is 1.35 per cent, which is being offered on a one-year product from Paragon Bank that will allow deposits of between £1,000 and £100,000.

While the Chancellor’s 2.2 per cent compares favourably with that, Maike Currie, investment director for personal investing at Fidelity International, said it is unlikely to keep pace with the inflation estimates Mr Hammond also revealed in the Budget. She said the rate will “barely cover the Office for Budget Responsibility’s inflation expectations” for the next three years.

“While this may be a market-leading rate, anyone saving into the new investment bond will struggle to achieve a real return, with OBR expectations for inflation to rise to 2.4 per cent in 2017 [and] 2.3 per cent in 2018 before falling back to two per cent in 2019,” Ms Currie said.

“To stand any chance of generating an inflation-beating return in the current environment, you are far better off looking further up the risk spectrum, investing in bonds issued by companies rather than the Government or moving into stocks and shares,” she added.

Sean McCann, a chartered financial planner at NFU Mutual, agreed, pointing out if inflation rises as expected “savers in the new NS&I bond are guaranteed to lose money”.

“It is galling for savers to be told the expected rate of inflation in one breath and in the next be offered a return below that,”

he added.

“It may encourage yet more people into stocks and shares investments where both the risks and returns are greater.”

Anyone looking to go down this route will be able to invest up to £20,000 via a stocks and shares Individual Savings Account (ISA) as of next month, with Mr Hammond confirming the limit will rise from £15,240 as expected.

However, Hannah Maundrell , of financial website money.co.uk, noted only the wealthiest would be likely to benefit from the increase in the ISA allowance.

“The boost in personal savings and the ISA allowance is good news because you can save more tax free,” she said.

“In reality it’s not a big give- away because most people don’t have anywhere enough in savings to benefit.

“Those that do should really question whether a savings account is the best home for their cash, or if clearing debts or looking to invest will help their money work harder.”