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.”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Parents face £1,000 'nanny tax' – how to afford itHiring a nanny is about to become even more of an expensive hassle for families, especially those in London. Here's how to cut costs
-
Is it cheaper to be a sole trader?It might be cheaper to be a sole trader due to changes to the tax system
-
The best fintech apps on the marketFrom digital banking to investment platforms, here are the top fintech apps on the market right now, according to David C. Stevenson
-
What pension providers don't tell you about your retirement moneyCheck the small print from your pension provider or risk losing thousands.
-
Britain’s stifling tax burdenChancellor Jeremy Hunt's Autumn Statement will see the tax burden rise in each of the next 5 years.
-
Brace for a year of tax risesThe government is strapped for cash, so prepare for tax rises. But it’s unlikely to be able to squeeze much more out of us.
-
Lock in high yields on savings, before they disappearAs interest rates peak, time to lock in high yields on your savings, while they are still available.
-
Are lifestyle funds still fit for purpose?Lifestyle funds have failed to do what they were supposed to do – shield savers from risk in the run-up to retirement.
