NS&I Increases Interest Rates by 15 Basis Points

The state-owned savings bank increased the interest rates on its Direct Saver and Income Bonds to 0.50%.

“The new interest rates will ensure that our products are priced in line with the broader savings sector. The increase will also help us to meet our annual net financing target for 2021-22 of £6 billion, in a range of £3 billion to £9 billion,” said Ian Ackerley, Chief Executive of National Savings and Investments (NS&I).

The interest paid on these accounts will now change from 0.35% gross annual equivalent rate (AER) to 0.50% gross AER with immediate effect.  

The previous increase to these products came in December, when rates increased from 0.15% gross AER to 0.35% AER.

Savers who already invested with NS&I are likely to benefit the most from the recent rise, said James Blower, Head of Digital at Moneyfacts.

“The move will help retain savers that are still there, but it is unlikely to be enough to entice savers back who have left as there are better offers to be had elsewhere,” he explained.

Although NS&I is still seeing strong inflows on Premium Bonds, it is seeing net outflows on other products.

“The NS&I is currently at around £2.1 billion of its net financing target of £6 billion which it is set by the Treasury to achieve this financial year,” said Blower.

The end of the financial year is set for 31 March 2022.

While the rise in rates will be welcomed by many, it still falls short of other competitive rates in the market, according to Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown.

Still, she added that the move is to be welcomed as savings rates respond to the recent interest rate hikes.

“While still far from market-leading, they are a vast improvement on rates that went as low as 0.01% for some of its products,” she explained.

She also noted that these types of products may entice investors with large sums of money, due to the protection they offer from the Treasury.

“You can hold up to £1 million in Income Bonds and £2 million in the Direct Saver, and it’s all protected by the Treasury. It’s worth saying though that the first £85,000 held with any institution is protected by the Financial Services Compensation Scheme so this will cover most people,” she said.

Those looking to find other competitive accounts can access our easy access savings charts.

Currently Investec Bank plc offers investors 0.71% AER, which is paid monthly, for their Online Flexi Saver account. In order to open the account, there is a minimum £5,000 deposit, and it must be managed online. You will also be able to make unlimited additions and withdrawals. 

Additionally, Brown Shipley offers their investors 0.61% AER, which is also paid monthly, for their Easy Access Account. Although you will have to open your account online, it can be managed by mail or telephone. 

For a slightly lower 0.60% AER, investors also have the choice of Marcus by Goldman Sachs® or the Leeds Building Society. Marcus by Goldman Sachs® provides an online savings account which does not need a minimum opening deposit and it also includes an added 0.10% for your first year as an introductory incentive. Leeds Building Society, however, pays its interest on maturity and requires its users to make a £1,000 minimum opening deposit.