National Savings & Investments Raises Rates on Savings Bonds to 4.69%

National Savings & Investments (NS&I) has significantly increased interest rates on its savings products, with its one-year Guaranteed Growth Bond now offering 4.69% interest. This move is part of an effort to attract a substantial amount of new deposits for the government.

NS&I aims to secure approximately £15 billion in additional funds from savers this financial year, which began in April. Early figures for April showed a net loss of £192 million in deposits, a trend that prompted the rate adjustments.

Previously, NS&I had adjusted its Premium Bond prize rate, increasing the prize fund from 3.6% to 3.8% for the upcoming draw. This followed an earlier reduction in April that had lowered the prize fund to 3.3%. These adjustments aim to make NS&I products more appealing to savers in a competitive market.

The newly enhanced Guaranteed Growth Bond offers a fixed rate for one year, which is notably higher than the current inflation rate of 2.8%. While some newer banks may offer slightly higher rates, between 4.7% and 4.85%, NS&I's key advantage is its government-backed protection status. This means all savings with NS&I are fully covered by the government, unlike commercial banks and building societies where deposits are typically protected up to £120,000 per individual or £240,000 for joint accounts.

The one-year bond's 4.69% rate surpasses the offerings from major high street banks, which are paying around 3.7%, with the best rates from Halifax and Lloyds at 4.3%. Coventry Building Society offers a competitive 4.63%.

NS&I is also offering a one-year Guaranteed Income Bond, which pays out interest monthly, at a rate of 4.6%. However, the institution advises caution regarding Guaranteed Growth Bonds with terms longer than one year. In these longer-term products, all interest is typically paid out at the end of the term and is taxed in that final year, potentially pushing savers above their personal savings allowance.

In March, NS&I faced scrutiny following an issue where it mislaid funds related to bereavement claims, affecting an estimated 34,000 claims totaling £367 million. The recent rate hikes and prize fund adjustments are seen as measures to restore confidence and attract the necessary funding.