National Savings & Investments (NS&I) yesterday launched some of the best fixed-rate deals it has offered for years.
You can now get between 4.99 per cent and 5.17 per cent on its Guaranteed Growth Bonds depending on how long you are able to tie up your money.
It marks the fifth rise this year and puts NS&I close to the top of the best buy charts.
NS&I has truly thrown down the gauntlet to other savings providers, which are now leapfrogging each other to offer the best fixed-rate deals.
NS&I savers can choose between Guaranteed Growth Bonds, which pay interest at the end of the term, or Guaranteed Income Bonds, which pay monthly.
Its one-year Guaranteed Growth Bond is 4.99 per cent – the best rate open to all savers since it paid 6.2 per cent for a short time in August 2023.
That’s £499 interest on each £10,000 you put in.
If you prefer interest monthly, the one-year Guaranteed Income Bond pays 4.88 per cent – just over £40 a month.
You can now get between 4.99% and 5.17% on NS&I's Guaranteed Growth Bonds depending on how long you are willing to tie up your money
NS&I is under pressure to woo savers as the Government has tasked it with raising £15billion (with a £4billion leeway) by the end of next March, and it is way behind its target.
You can get a rate slightly higher from its top-paying competitors – up to 5.12 per cent against 4.99 per cent – but that extra 0.13 percentage points is equivalent to just £13 a year per £10,000.
For some, that is a price worth paying to enjoy the safety offered by NS&I, which guarantees all your money.
Other banks offer security only up to £120,000 under the Financial Services Compensation Scheme.
NS&I’s competitors will no doubt now up their rates – some have already told me they intend to do so.
That could lead to yet another increase from NS&I, which is desperate to keep up with the competition.
But you could lose out on valuable interest while you are waiting for better rates. If you leave your money in an easy-access account in the meantime, you could end up with less interest than if you lock in a deal now.
NS&I’s two-year Guaranteed Growth Bond now pays 5.07 per cent while for three years the rate is 5.1 per cent and 5.17 per cent for five years.
The Guaranteed Income Bonds versions are now at 4.96 per cent, 4.99 per cent and 5.06 per cent for two, three and five years.
If you go for a longer-term Guaranteed Growth Bond, watch out for your tax bill. They pay out at the end of the term, meaning all the interest counts towards your personal savings allowance (£1,000 a year for basic-rate payers and £500 for higher-rate payers) in the year it comes to an end.
There is no such problem with the Guaranteed Income Bonds because they pay out interest each month.
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