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.
-
Widow’s warning: Are you missing out on up to £11,000 in inherited state pension?If your late spouse built up contributions under the old state pension, you could be entitled to inherit a portion of it. What are the rules and are you eligible?
-
How much should I have in savings? Average savings by ageWe look at how much you should aim to have in your savings at every decade of your life, and how you can go about achieving this.
-
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
-
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.
-
One-year fixed savings drop below 6% - have they reached their peak?The best one-year fixed-rate savings deals have fallen below the 6% mark. Find out if saving rates have reached their peak and the current top rates on the market.
-
NS&I cuts interest rate on Green Savings Bonds - where can you get a better deal?News The state-backed bank has slashed the interest rate on its Green Savings Bonds from 5.7% to 3.95%
-
Charles Stanley Direct launches cash savings - is it any good?Charles Stanley Direct has launched a savings platform to give savers access to the best deals on the market. We look at how it compares to other services.
-
Is NS&I safe?National Savings and Investments (NS&I) is popular for its Premium Bonds and savings products. But how safe is it?
-
Act fast: HSBC to pull its 5.7% one-year bondSavers have until Wednesday to apply for HSBC’s one-year fixed-rate bond. The withdrawal of the account follows NS&I’s decision to pull its market-leading one-year bonds earlier this month. We explain why you need to act fast to secure the best rates.
-
NS&I withdraws market-leading 6.2% one year fixed bond - what are the alternatives?National Savings & Investments (NS&I) has now dropped its one year fixed bond paying a table topping 6.2% interest rate a month after launch. Here’s where to find the next best alternative for one year fixed savings
