NS&I boosts fixed-term savings rates

The NS&I, the government-backed savings institution has mirrored recent rate rises seen elsewhere in the market.

Origami dollar seedling being watered with coins
(Image credit: Getty images)

National Savings & Investments (NS&I) has boosted rates across a number of its fixed-term products.

The firm behind the ever-popular Premium Bonds is upping the rate it offers amid increasing competition within the savings space, with the best savings accounts now offering one-year fixed rate deals of more than 6%.

The interest rates paid on NS&I’s fixed-term Guaranteed Growth Bonds and Guaranteed Income Bonds are increasing to 5.00% for new customers, up from the existing 4.00% and 3.90% respectively.

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The rate NS&I offers on its two-year and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds, which are not currently on general sale but are available to existing customers when they reach the end of their current fixed term, will also be upped to 5.10%.

Customers who already have one of the two bonds will continue on their original fixed rate. However, at the end of the term, they will be able to roll their savings over into a new product at the rate on offer at that time.

The changes to NS&I’s fixed-term products come two weeks after it announced interest rate increases on a number of its variable products. These are also effective from today. NS&I customers holding Direct Saver and Income Bonds will see the return on their savings boosted to 3.40% from 2.85%.

NS&I chief executive Dax Harkins, says: “Guaranteed Growth Bonds and Guaranteed Income Bonds are popular with our customers and I’m pleased that we’re able to announce these changes today for new and existing customers to take advantage of.”

“Customers holding Direct Saver and Income Bonds will also see a boost from today, with their interest rates going up, and millions of Premium Bonds holders will also have a better chance of winning a prize from the next draw.”

“The changes announced today ensure that NS&I’s products remain attractive to customers and that it continues to balance the interests of savers, taxpayers and the broader financial services sector,” he adds.

Are Premium Bonds the way to go?

NS&I is perhaps best known for its Premium Bonds and the government-backed institution recently upped the number of prizes available, with an extra £39 million in prizes up for grabs.

The odds of each £1 Premium Bond winning a prize will remain at 24,000 to 1, with more chances each month for customers to win prizes worth between £50 and £100,000.

Myron Jobson, senior personal finance analyst at the investment platform Interactive Investor, notes: “Premium Bonds can be fun lottery-style alternatives to an easy-access savings account and might tempt some savers hoping for good luck to bolster their wealth amid the cost of living crisis.”

“But the fact remains that while some savers might be lucky enough to hit the jackpot or win big early on, others may save and wait for long periods for even a small return. It still pays to shop around for the best deal.”

Are savers getting a fair deal?

Broadly, savings rates have steadily trended upward this year, following repeated rate rises by the Bank of England (BoE).

And after years of rock-bottom interest rates, savers finally have access to more generous returns on their cash, although the best deals don’t hang around for long

There are also signs banks could be leaning towards passing more of the BoE’s rate increases on to savers. After the Financial Conduct Authority (FCA) summoned some of the country’s biggest banks to ask why rate rises weren’t passed on to savers, lenders have been quick to respond with higher rates on savings accounts. 

The regulator said: “We have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products. We now want to see that progress accelerate.”

But while waiting on the big banks to play catch-up, you could be missing out on hundreds of pounds in interest

Tom Higgins

Tom is a journalist and writer with an interest in sustainability, economic policy and pensions, looking into how personal finances can be used to make a positive impact. He graduated from Goldsmiths, University of London, with a BA in journalism before moving to a financial content agency. 

His work has appeared in titles Investment Week and Money Marketing, as well as social media copy for Reuters and Bloomberg in addition to corporate content for financial giants including Mercer, State Street Global Advisors and the PLSA. He has also written for the  Financial Times Group.

When not working out of the Future’s Cardiff office, Tom can be found exploring the hills and coasts of South Wales but is sometimes east of the border supporting Bristol Rovers.