NS&I launches new issues of savings products with rates of more than 6%

Savings giant NS&I has launched new issues of its one-year Guaranteed Growth Bonds and Guaranteed Income Bonds, paying the highest rates since they first went on sale in 2008.

Available from Wednesday, the new issues offer savers 6.20% AER (annual equivalent rate) for both one-year fixed-rate Guaranteed Growth Bonds and one-year Guaranteed Income Bonds.

Previously, one-year Guaranteed Growth Bonds paid 5.00% AER and one-year Guaranteed Income Bonds paid 5.12% AER.

NS&I is backed by the Treasury, so money held in it has 100% security.

Guaranteed Growth Bonds and Guaranteed Income Bonds one-year fixed-rate issues are open to savers wishing to fix for one year at a guaranteed rate.

Savers need a minimum investment of £500 and a maximum of £1 million in each issue. After one year, savers will have the choice to withdraw their cash or reinvest.

Economic Secretary to the Treasury Andrew Griffith said: “It’s vital that savers are able to benefit from recent interest rate rises, so I’m delighted that NS&I is releasing new issues of Guaranteed Growth Bonds and Guaranteed Investment Bonds at over 6% – the highest rate since they were launched.”

NS&I chief executive Dax Harkins said: “Today, we are able to offer new issues with an improved interest rate for customers wanting the certainty of knowing how much they will be earning on their savings for one year.

“At the same time, existing customers with maturing bonds can choose to invest at new higher rates for two-, three- and five-year Guaranteed Growth Bonds and Guaranteed Income Bonds.”

Two-, three- and five-year versions of these products are only available to existing customers with maturing deals and are not open to new customers.

NS&I has a duty to balance the interests of savers, taxpayers and the broader financial services sector.

According to financial information website Moneyfactscompare.co.uk, the average one-year fixed savings rate on the market is 5.34%, based on someone having £10,000 to put away.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “NS&I has gone all-in with the rates on these one-year bonds, and savers are likely to snap them up.

“For the vast majority of the time, it applies the time-honoured rule that it wants to offer something in the middle of the pack, so it attracts enough cash, but without paying over the odds for it, so landing a rate at the top of the pile is quite a departure.

“It reflects the fact the organisation has a fairly punchy net financing target of £7.5 billion in this financial year, at a time when people’s finances are under so much pressure that they’re spending their savings to make ends meet.”

Figures released by the Bank of England on Wednesday showed that during July households withdrew a net £0.1 billion from NS&I accounts, compared with £0.2 billion of net withdrawals in June.

In further signs that households are using their savings to get by, the combined net flow of households’ deposits with banks and building societies and NS&I accounts was £0.3 billion in July, marking a significant decrease from £3.6 billion flowing in the previous month.

Myron Jobson, senior personal finance analyst at interactive investor, said: “The latest round of rate hikes by NS&I is the cream of the crop.”

He added that the move by the savings giant “throws down the gauntlet to high street banks”.