NS&I hikes interest rates on savings accounts – are they best buys?

NS&I has boosted interest rates on a host of savings accounts, including fixed term savings bonds and an easy-access account with immediate effect.

The rate increases mean they sit close to other best buy savings accounts of the market right now.

The UK government-backed bank, which is popular for its premium bonds, has upped the savings rates on eight one to five-year fixed-term savings bonds and its Investment Account.

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We list the accounts that have gone up and how they compare to the rest of the market.

Which NS&I accounts will pay more?

This is the first time NS&I has boosted the rates on its one to five-year savings bonds since January this year.

These are the nine accounts having their interest rates boosted:

• Guaranteed Growth one-year bond: Rising from 4.07% gross/AER to 4.5% gross/AER
• Guaranteed Income one-year bond: Rising from 4% gross/4.07% AER to 4.41% gross/4.5% AER
• Guaranteed Growth two-year bond: Rising from 3.98% gross/AER to 4.48% gross/AER
• Guaranteed Income two-year bond: Rising from 3.91% gross/3.98% AER to 4.4% gross/4.48% AER
• Guaranteed Growth three-year bond: Rising from 4.02% gross/AER to 4.45% gross/AER
• Guaranteed Income three-year bond: Rising from 3.95% gross/4.02% AER to 4.37% gross/4.45% AER
• Guaranteed Growth five-year bond: Rising from 4.05% gross/AER to 4.4% gross/AER
• Guaranteed Income five-year bond: Rising from 3.98% gross/4.05% AER to 4.32% gross/4.4% AER
• Investment Account: Rising from 1% gross/AER to 2.05% gross/AER

You can open one of the eight bonds with a minimum investment of £500 and can add a maximum of £1 million. The accounts are fixed-term so funds cannot be withdrawn early.

After the accounts mature, you can withdraw any cash or reinvest it into a new NS&I account.

You can apply for the accounts on the NS&I website.

Savers can only apply for the Investment Account through the post. You can find out more by contacting NS&I.

NS&I also recently brought back its green savings bond, offering savers a three-year fixed rate at 3.82%.

How do NS&I's savings accounts compare to other deals?

Despite NS&I hiking the rates on its savings accounts, there are slightly better options out there if your key requirement is to get the top rate, based on the latest data from Moneyfacts.

The better deals are via small providers that are protected by the Financial Services Compensation Scheme (FSCS).

Kalpana Fitzpatrick, digital editor-in-chief of MoneyWeek, said: “While you may find slightly better rates, and we are talking about a small difference, it is worth noting that NS&I is backed by the government, meaning your cash will always be 100% safe. While most banks are protected by the FSCS, this is limited to £120,000 with any given group of banks, so if you need to hold more cash, NS&I is an attractive option.”

NS&I’s one-year bonds offer you rates up to 4.5% on a minimum investment of £500, but thisbank is offering a one-year fixed savings account with a 4.55% gross/AER interest rate with a £100 investment.

Meanwhile, NS&I’s two-year bonds offer you an interest rate of up to 4.48% on a £500 minimum investment, but thisbank’s two-year fixed-rate account has an interest rate of 4.57% on a minimum investment of £100.

NS&I’s three-year bonds’ interest rates are up to 4.45% on a £500 investment, but thisbank has a three-year fixed-rate account paying 4.59% on a £100 minimum investment.

Opt for one of NS&I’s five-year bonds, and you’ll get an interest rate of up to 4.4%, but thisbank is offering a five-year savings account paying 4.57% on a minimum investment of £100.

“If you are in a position to lock your money away for five years or more, then consider investing some or all of it, where returns can be higher over the long term and you can protect your money from being eroded against inflation,” Fitzpatrick added.

In terms of NS&I’s Investment Account (2.05%), you can get much better rates on easy-access savings from a number of banking providers, including Newcastle Building Society which has a savings account paying 4.15% interest.