National Savings and Investments (NS&I) has increased the interest rates on its Direct Saver and Income Bonds accounts, as well as launching a new issue of their British Savings Bonds.
With the Bank of England base rate predicted to remain at its current level of 5.25 per cent for a bit longer, savers can still benefit from high interest rates.
NS&I increased the interest rate for Direct Saver to four per cent AER from 3.65 per cent AER, on May 23, 2024.
The Income Bonds also increased to 3.93 per cent gross/four per cent AER from 3.5 per cent gross/3.65 per cent AER.
New issues of the 1-year fixed rate British Savings Bonds also went on sale on May 23, 2024.
Guaranteed Growth Bonds and Guaranteed Income Bonds are one of the British Savings Bonds announced by the Chancellor in the Spring Budget 2024.
NS&I
The 1-year fixed rate Guaranteed Growth Bonds offers 4.50 per cent gross/AER and the Guaranteed Income Bonds offers savers 4.41 per cent gross/4.50 per cent AER.
The one year fixed Bond sits alongside the three-year Bond which went on sale in April this year.
With no announcement of their increased rates, some experts suggested the decision was made to avoid influencing voters ahead of the General Election in July.
James Blower at the Savings Guru, said: “The increases are probably enough to improve retention but not attract new balances.”
Blower said that NS&I will be looking to remain competitive ahead of the announcement of its first quarter results in five weeks’ time.
He said: “Had they not done this, they’d have been reporting good outflows when their Q1 results were announced in July.”
But Blower said that it was unlikely that there would be any further movement on rates before the election, as the government agency will not want to be seen to influence results.
He added: “Don’t expect any further changes now until after the election – it is likely these increases were decided and agreed before the snap general election was announced.”
Commenting on the quiet increase, Sarah Coles, head of personal finance at Hargreaves Lansdown said: “Savings rates have crept up a little at NS&I. They’ve kept it quiet, given the general election, but they’re not much to shout about anyway. You can do so much better elsewhere.
“The rate on the easy access Direct Saver has risen to four per cent, but it’s still significantly off the pace of the best on the market.
“Accounts offering more than five per cet are decidedly thin on the ground now, but there’s a whole raft of deals available at 4.9 per cent or above, so there’s no need to settle for less.”
Meanwhile, the new one-year British Savings Bond at 4.5 per cent, sits “well under” the best on the market at 5.22 per cent.
The best rates on the market are available from smaller online banks and cash savings platforms, so they’re a sensible place to start when people are looking for the best deal.
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NS&I said there were more than 5.8 million prizes up for grabs in the May 2024 Premium Bonds prize draw GETTY
Explaining why NS&I has done this, Coles said: “These small rises, which put them significantly under the best on the market, are highly unlikely to be designed to tempt more savers.
“If it was in the cash-attracting business, we would have seen much bigger jumps, to more attractive rates.
“Instead, it’s likely to be a sign that NS&I was keen to stem a flow of savers pulling cash out of the institution, so it has some relatively healthy numbers to report in July.
“The institution always has to balance the need to raise money against the need to offer value-for-money for taxpayers – while not distorting the savings market as a whole. It’s safe to say that these rates amply reflect its aim to be ‘good enough but not too good.”