National Savings and Investments has finally raised the rates on a number of its easy-to-access, fixed-rate savings offerings.
Its Direct Savings and Income Bonds now pay 1.8%, down from 1.2% previously, representing better rates for around 600,000 savers.
In December 2021, they only paid 0.15%. Income bonds are popular with retirees because they pay income each month.
Interest Increase: NS&I Direct Savings and Income Bonds now pay 1.8%, down from 1.2% previously, representing better rates for approximately 600,000 savers
Some 346,000 Direct Isa holders also saw their rate drop to 1.75% from 0.9%. These three rate changes come into effect immediately.
Anna Bowes of Savings Champion said: “The move means NS&I has finally become competitive on its easy-to-access direct savings and income bonds.”
On guaranteed growth bonds, it will hike its one-year fixed rate from 1.85% to 3.6%, or 175 basis points, the biggest of all its hikes.
His two-year, three-year and five-year contracts will drop to 3.65%, 3.7% and 3.8% respectively. Meanwhile, its guaranteed income bonds will pay 3.5% y/y, down from 1.8% previously.
For the two-, three- and five-year versions, the rates will reach 3.55%, 3.6% and 3.7% respectively.
And finally, its two-year fixed interest savings certificates will drop from 2.15% to 3.4%, and its five-year version up to 3.55%.
All these new fixed rate increases will take effect from December 1st. However, none of these accounts are currently on sale to new customers.
Investors who already have the bonds can renew them when they mature. Those with accounts maturing before December 1 will be offered the lower rate.
About 22.5 million premium bondholders also got a big boost as the fund’s price rose to 2.2% this month.
The odds of winning have dropped sharply – from 35,500-1 at the start of this year to 24,000-1 now. Meanwhile, the number of £100,000 and £50,000 prizes up for grabs has almost doubled.
These measures stem from the fact that the Bank of England’s base rate rose from 0.1% in December 2021 to 2.25% currently in September. The rate is likely to be raised even higher when Bank of England officials meet next week and then again in December.
Increase: Fixed interest savings certificates will go from 2.15% to 3.4%, and its five-year version up to 3.55%
However, there are now a number of easy-to-access savings accounts paying over 2% that outperform NS&I. And, despite the improvements, the rates held by millions of people at NS&I are still shockingly low.
About 1.5 million savers in NS&I’s investment account, managed by the post office, saw their rates rise yesterday to a meager 0.4% from a terrible 0.01%.
Ms Bowes adds: ‘Its loyal investment account holders are still treated very badly.’
Savers languishing in these accounts are urged to move. The great appeal of NS&I is that all of your savings are guaranteed by the government.
With banks and building societies, the maximum you can claim under the Financial Services Compensation Scheme if your supplier has problems is £85,000, or £170,000 on joint accounts.
NS&I aims to raise £6 billion (plus or minus £3 billion) in its current financial year, which runs from April 1, 2022 to March 31, 2023.
Bank of England figures show NS&I had already brought in £2.83bn in its first five months – and that’s before this month’s rise in the premium bond premium fund from 1.4% to 2.2%, which may explain the slowness of easy-access and package lifting.
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