Proactive Investors - British Savings Bonds went on sale on Wednesday, boasting guaranteed rates of 4.07% and 4.15% over three years.
However, analysts said the Treasury-backed bonds were below savings rates available elsewhere as UK base interest remains high.
“This is disappointing, especially after the fanfare in the Budget, because it’s so far behind the market leaders,” Hargreaves Lansdown’s Sarah Coles commented.
“At this rate, these bonds risk disappearing without a trace.”
State-owned National Savings and Investments (NS&I) began selling the bonds on Wednesday, after Chancellor Jeremy Hunt unveiled the products in the Spring Budget last month.
This includes a Guaranteed Growth Bond with an annual rate of 4.15%, alongside a Guaranteed Income Bond paying interest of 4.07%, on savings up to £1 million.
“This is a new opportunity for UK savers to benefit [...] knowing that their money is fully protected,” Treasury economic secretary Bim Afolami commented.
“The bonds will help to grow the savings culture in the UK while providing cost-effective financing for the government.”
Coles noted that rates of up to 4.65% were still available for similar products elsewhere, though did acknowledge the high limit could appeal to those with large savings balances.
“These NS&I rates just aren’t special enough to persuade swathes of new savers to tie their money up for longer,” she added.
That said, Moneyfacts finance expert Rachel Springall pointed out that NS&I intended to offer the bonds for an “extended period of time” as rates across the market fall in the hope of cuts to base interest later this year.
“As has been evident, fixed rates on savings accounts are coming down, so the deals that sit towards the top of the market will likely be in high demand,” she said.