With interest rates at historic lows savers have been suffering. But the government has now thrown them a lifeline by boosting the National Savings & Investments (NS&I) deposit limit. NS&I is state-owned and backed by the Treasury. This means your money is 100% guaranteed by the government. With deposit limits of up to £2m on some accounts this makes it an excellent choice if you want to lock away large sums of money safely.
The added attraction of NS&I at present is that it is offering three of the five top-paying savings accounts on the market. However, this has caused a surge in deposits, which creates a problem. Because it is government-backed, NS&I isn’t allowed to take in too much money. So, every year a cap is put in place limiting total deposits.
Until last week this cap was £6bn for the current financial year. But from April to June alone savers deposited £14.5bn. This meant a rate cut was expected. This is usually the case when NS&I hits the deposit limit. It slashes interest rates and closes accounts. But not this time. “NS&I has been asked to bring deposits of £35bn by next April to help the government fund the costs of coronavirus recovery schemes,” reports Adam Williams in The Daily Telegraph. The move should “prevent savings rates... from falling further.”
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All this means it is a good time to check what interest rate you are currently earning on your savings and see if you would be better off shifting your money to NS&I. If you are looking for an instant-access account, then NS&I’s Income Bonds top the best buy tables, paying 1.15%. You can deposit between £500 and £1m into the account and make withdrawals whenever you like. Just be aware that the minimum withdrawal is £500. This account can be managed online, by phone or post.
NS&I’s Direct Saver account pays 1% on deposits from £1 to £2m and allows unlimited withdrawals of any amount without notice. You can access your account online or by phone. Then there is the so-called Investment Account, which is actually just an easy-access cash savings account. You can save between £20 and £1m and earn 0.8% interest. It can only be operated by post.
All in all, you could tuck up to £4m into NS&I’s best-buy accounts safe in the knowledge your money is 100% guaranteed. Just make sure you keep an eye out for better deals if savings rates eventually start to improve.
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