NS&I has increased interest rates on its British Savings Bonds, with savers now able to secure returns of more than five per cent on several fixed-term accounts. Rates have risen across the one, two, three and five-year Guaranteed Growth Bonds and Guaranteed Income Bonds.
Rate increases across the board
The biggest increase highlighted by Moneyfactscompare.co.uk (Moneyfacts) is on the five-year Guaranteed Growth Bond, which has risen by 0.32 percentage points from 4.85 per cent to 5.17 per cent gross/AER.
Savers choosing the two-year bond can now receive 5.07 per cent AER, while the three-year option pays 5.10 per cent AER. The one-year bond remains just below the five per cent mark at 4.99 per cent AER.
NS&I's current rates show the new Guaranteed Growth Bond offers as: 4.99 per cent for one year, 5.07 per cent for two years, 5.10 per cent for three years and 5.17 per cent for five years. The minimum investment is £500 and interest is taxable.
Growth or monthly income
Savers can choose between Guaranteed Growth Bonds and Guaranteed Income Bonds. Guaranteed Growth Bonds add the interest to the investment, while Guaranteed Income Bonds are designed for people who want their interest paid out monthly.
The AERs on the Income Bonds are also 4.99 per cent for one year, 5.07 per cent for two years, 5.10 per cent for three years and 5.17 per cent for five years. However, because interest is paid monthly rather than added to the investment, the gross rates are 4.88 per cent, 4.96 per cent, 4.99 per cent and 5.06 per cent respectively.
NS&I savings also have a significant difference from money held with most banks and building societies because the organisation is backed by HM Treasury. NS&I says the money customers invest with it is 100 per cent secure, rather than being subject to the normal deposit protection limit applying to most banks and building societies.
Savers warned to compare rates
Despite the increases, Moneyfacts warned that the new NS&I deals do not currently sit at the top of its savings rate tables. People considering the bonds also need to be comfortable leaving their savings untouched for the entire fixed term.
NS&I's terms for Guaranteed Growth Bonds state that there is no access to the money during the term and the investment cannot normally be withdrawn until the bond matures. Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “It is also essential to choose a term carefully because money invested in NS&I’s British Savings Bonds cannot be withdrawn before the end of the fixed term.”
She added that competition in the savings market was good news for consumers but warned that attractive deals may not remain available indefinitely if providers attract sufficient deposits and withdraw products from sale. Full details can be found on the NS&I website.
