NS&I Increases Income Bonds Rate | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 18/11/2021

National Savings & Investments (NS&I) has increased the rate on its popular Income Bonds today, but the new rate is still significantly lower than the top accounts in the easy access savings charts.

Income Bonds from NS&I now pay 0.15% AER, up from its previous rate of 0.01% AER. Income Bonds continue to require a £500 minimum deposit to open and allow savers to make further additions. Withdrawals can also be made without notice or a penalty via a nominated account.

Although savings accounts with NS&I remain popular, savers looking for the best rate will find much more competitive accounts in the easy access savings charts.

For example, Shawbrook Bank currently pays the top rate in the chart with its Easy Access – Issue 28 paying 0.67% AER, which is 0.52% higher than the new Income Bonds rate. This account requires a £1,000 minimum deposit to open. It also allows further additions and withdrawals, although all transactions must be made via a nominated account.

Cynergy Bank also has a highly competitive rate with its Online Easy Access Account (Issue 42) paying 0.66% AER, which includes a 0.36% bonus for 12 months. This account can be opened with a minimum deposit of just £1, but a Cynergy Bank Authenticator App or Digipass is needed to open and manage the account. It allows further additions and withdrawals can be made via a nominated account.

Paragon Bank’s Triple Access Account (Issue 5) (0-3 withdrawals pa) pays 0.65% AER, which is 0.50% higher than what is paid on NS&I’s Income Bonds. This account requires a £1 minimum deposit to open. Further additions are allowed via a nominated account but withdrawals are restricted to three in a 12 month period, with a lower interest rate being paid if further withdrawals are made.

Despite the low rate offered on NS&I Income Bonds, the account remains popular with savers as it has the security of being backed by HM Treasury. Savers, however, should be aware that, all the accounts in our savings charts are protected under the Financial Services Compensation Scheme (FSCS). Under this scheme, all deposits up to a maximum of £85,000 in a sole account are protected in the event the bank goes bust.

Deposits up to the maximum are only protected under one banking licence, which means savers should ensure that if their savings exceed £85,000, money should be split between banks or building societies with different banking licences. A full list of which banks and building societies are under which licence can be found on our depositor protection scheme guide.

As well as this, unlike Premium Bonds from NS&I which are tax-free, tax may be payable on interest earned from Income Bonds. Savers looking for a tax-free easy access savings option may want to instead consider an easy access ISA which is tax-free on deposits up to £20,000 for the 2021/22 tax year.

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