National Savings and Investments (NS&I) has increased interest rates on its Direct Savings and Income Bond accounts, as well as launching a new issue of its UK Savings Bonds.
With the Bank of England’s base rate expected to remain at its current level of 5.25 per cent for a little while longer, savers can still benefit from higher interest rates.
NS&I increased the Direct Saver interest rate to four per cent AER from 3.65 per cent AER, on 23 May 2024.
Revenue bonds also rose to 3.93 percent gross/four percent AER from 3.5 percent gross/3.65 percent AER.
New issues of 1-year fixed-rate UK savings bonds also went on sale on 23 May 2024.
Guaranteed Growth Bonds and Guaranteed Income Bonds are among the UK savings bonds announced by the chancellor in the Spring Budget 2024.
NS&I has increased interest rates again
NS&I
1-year fixed rate guaranteed growth bonds offer 4.50 per cent gross/AER and guaranteed income bonds offer 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.
Without announcing their increased rates, some experts suggested the decision was made to avoid influencing voters ahead of the general election in July.
James Blower at Savings Guru, said: “The increases are probably enough to improve retention, but not to attract new balances.”
Blower said NS&I will look to remain competitive ahead of its first-quarter results in five weeks.
He said: “Had they not done that, they would have reported good results when their first quarter results were announced in July.”
But Blower said there was unlikely to be any further movement on rates ahead of the election, as the government agency would not want to be seen to influence the results.
He added: “Don’t expect any further changes now until after the election – it is likely that these increases will have been decided and agreed before the snap general election is called.”
Commenting on the quiet growth, Sarah Coles, head of personal finance at Hargreaves Lansdown said: “Savings rates have risen slightly in NS&I. They’ve kept it quiet, given the general election, but still not much to shout about. You can do much better elsewhere.
“The direct savings rate of Easy Access has increased to four per cent, but is still significantly off the pace of the best in the market.
“Accounts offering more than five per cent are definitely hot on the ground right now, but there are a number of deals available at 4.9 per cent or above, so there’s no need to settle for less.”
Meanwhile, Britain’s new one-year savings bond at 4.5 per cent is “well below” the best in the market at 5.22 per cent.
The best rates on the market are offered by smaller online banks and 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 increases, which place them significantly below the best in the market, are very unlikely to be designed to tempt more savers.
“If it was in the business of withdrawing money, we would have seen much bigger jumps, at more attractive rates.
“Instead, it is likely to be a sign that NS&I was keen to stem a flow of savers pulling money out of the institution, so there are some relatively healthy numbers to report in July.
“The institution must always balance the need to raise money with the need to provide value for money to taxpayers – while not distorting the savings market as a whole. It’s safe to say that these rates broadly reflect her goal of being “good enough, but not too good.”