National Savings and Investments (NS&I) has increased interest rates on its Direct Saver accounts and Income Bonds, 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 longer, savers can still benefit from high interest rates.
On 23 May 2024 NS&I increased the interest rate for the Direct Saver to four per cent AER from 3.65 per cent AER.
Income bonds also rose to 3.93 percent gross/four percent AER from 3.5 percent gross/3.65 percent AER.
On 23 May 2024, new issues of 1-year fixed rate UK savings bonds also went on sale.
Guaranteed Growth Bonds and Guaranteed Return Bonds are among the UK savings bonds announced by the Chancellor in the 2024 Spring Budget.
NS&I
The 1-year Fixed Rate Guaranteed Growth Bond offers 4.50 per cent gross/AER and the Guaranteed Income Bond offers savers 4.41 per cent gross/4.50 per cent AER.
The one-year fixed-rate bond sits alongside a three-year bond that went on sale in April this year.
With no rate hike announced, some experts suggested the decision was made to avoid influencing voters ahead of July’s general election.
Savings Guru’s James Blower said: “The increase is likely to be enough to improve retention but not attract new balances.”
Blower said NS&I will try to stay competitive before announcing its first-quarter results in five weeks.
He said: “If they hadn’t, they would have reported good outflows when their Q1 results were announced in July.”
But Blower said further rate moves were unlikely before the election because the government agency would not want to be seen to influence the outcome.
He added: “Now don’t expect any further changes until after the election – it is likely that these increases will have been decided and agreed before the snap general election was called.”
Sarah Coles, director of personal finance at Hargreaves Lansdown, said of the quiet increase: “Savings rates have picked up a bit at NS&I. They kept it quiet due to the general election, but still not much to shout about. You can do much better elsewhere.
“The Direct Saver Easy Access rate has risen to four per cent, but is still well behind the pace of the best in the market.
“Accounts offering more than five per cent are definitely thin right now, but there are plenty of offers available at 4.9 per cent or more, so there’s no need to settle for less.”
Meanwhile, the new one-year UK Savings Bond at 4.5 per cent is “well below” the market best at 5.22 per cent.
The best rates on the market are available from smaller online banks and cash-saving platforms, so it’s a sensible place to start when people are looking for the best deal.
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NS&I said more than 5.8 million prizes are available in the May 2024 premium bond draw GETTY
Explaining why NS&I did this, Coles said: “These small increases, which put them well below the best in the market, are highly unlikely to have been designed to attract more savers.
“If it was in the area of ​​attracting money, we would see much bigger jumps to more attractive rates.
“Instead, it’s probably a sign that NS&I wanted to stem the flow of savers pulling cash out of the institution, so it has some relatively healthy numbers in July.
“Institutions must always balance the need to raise money with the need to offer taxpayers value for money – while not distorting the savings market as a whole. It’s safe to say that these rates adequately reflect its goal of being “good enough, but not too good.”