Now is not a great time to be a saver. With interest rates at an all-time low, those of us with nest eggs are probably thinking whether there’ll be anything worth hatching at all. So, if you are a saver then you may well have welcomed the news about the government’s savings bond which aims to give savers a 2.2% return on their investment. In the current market, that’s probably one of the best interest rates you’re likely to get – so here’s the lowdown.

Government to launch savings bond with 2.2% return

The savings bond (officially called Investment Guaranteed Growth Bonds) is expected to tempt around two million savers and will officially launch in Spring 2017. You’ll have to be 16 or over to open one and invest a minimum of £100 into the bond, the maximum you can deposit is £3,000 and the bond matures after three years (so you can’t take it out before then). If you put in the £3,000 limit then you’ll earn about £66 in interest after one year. It doesn’t sound like much but it’s better than anything else around at the moment.

There are a few things you’ll need to be aware of though. The 2.2% return is only ‘indicative’ which basically means it could be more, or it could be less; it’ll ultimately depend on what happens with the rest of the market and what state the economy’s in. Your interest is also subject to tax (because there’s no such thing as a free lunch, or 2.2% interest it seems) but only if you earn enough interest to take you over your Personal Savings Allowance. This means that the first £1,000 of savings interest earned in a year is tax-free. If you are a higher rate taxpayer (40%), then your allowance is £500, and 45% taxpayers have no savings allowance at all.

Whilst the savings bond won’t turn you into a millionaire after three years, it could be a good option for any keen savers who are fed up with dismal rates of interest. The announcement of the savings bond – which will be run by the government controlled National Savings and Investment (NS&I) – comes hot on the heels of the Financial Conduct Authority’s (FCA) investigation into savings accounts and cash ISAs.

The FCA found that some loyal customers with long standing accounts, had savings languishing in cash ISAs paying as little as 0.01%. In response to this, the FCA announced their ‘Sunlight Remedy’ which aims to help people fully realise what their savings and investments are actually earning them and encouraging easier and quicker switching. As a result, from 1 December 2016, anyone selling financial products will need to provide crystal clear information on interest rates offered on cash savings products as well as clearly reminding their customers about changes in interest rates or the end of an introductory rate. The information should be made obvious – such as on statements and all other account related letters and correspondence.

But if a commitment to a savings bond isn’t for you but you still want to make your money work, then take a look at what other savings accounts and cash ISAs there are. As well as earning you some interest, think about what else is important to you – like having instant access to your funds or whether you want to manage your account online or in branch (or both). Choosing a savings account, or a current account if the interest rate is better, shouldn’t be hard so at comparethemarket.com we make it easy to compare rates and benefits – just click and compare.