National Savings & Investments (NS&I) has launched the highest paying 1-year Guaranteed Growth and Guaranteed Income Bonds since they first went on sale in 2008. Not only that, but the rates of 6.20% gross/AER for the Growth Bonds and 6.03% monthly gross for the Income Bonds, puts them straight to the top of our Best Buy tables.
You can deposit a lump sum of between £500 and £1 million pounds into the latest issue of these bonds and the good news for those savers with large amounts of cash, is that all the money deposited is protected by HM Treasury – so up to £1 million – rather than the usual Financial Services Compensation Scheme (FSCS) protection of £85,000.
These popular bonds had been removed from sale in September 2019 – but the 1-year term Bond was relaunched in February this year. Money in the Guaranteed Growth Bond earns a fixed rate of interest for 12 months but there is no access at all until maturity. The Guaranteed Income Bonds pays monthly interest but once again you cannot access the capital until maturity. So, it’s important to make sure that you don’t need the money for a year.
For new customers to NS&I, the bonds can be opened online only and we’ve had feedback from a couple of people that they’ve had a few issues, so please let us know how you find the account opening process if you decide this account is for you.
For those looking to switch from an NS&I account that you already hold you can either do this online or you can download an application form and do it by post.
Rates for existing customers have also been increased
If you are an existing Bond holder, you can also benefit from the new 1-year rates.
But there are also two, three and five year Guaranteed Growth Bonds and Guaranteed Income Bonds which are only available for existing customers with maturing products, which will also benefit from new interest rates when their Bonds and Certificates mature, if they decide to reinvest.
It’s also good to see these new rates being applied immediately – in the past there has been a delay which was incredibly frustrating for those with bonds maturing before the new rates were live.
Guaranteed Growth Bonds – rates with effect from 30th August 2023
- 2 Year – new rate is 5.80% AER – up from 5.10% (previous issue)
- 3 Year – new rate is 5.80% AER – up from 5.10% (previous issue)
- 5 Year – new rate is 5.50% AER – up from 4.25% (previous issue)
Unlike the 1-year bond, these rates are competitive but not market-leading. The best rates available elsewhere are 6.05% for 2-years, 6% for 3-years and 5.85% for 5-years.
Guaranteed Income Bonds - rates with effect from 30th August 2023
- 2 Year – new rate is 5.65% gross/5.80% AER – up from 5.10% gross/5.22% AER (previous issue)
- 3 Year – new rate is 5.65% gross/5.80% AER – up from 5.10% gross/5.22% AER (previous issue)
- 5 Year – new rate is 5.37% gross/5.50% AER – up from 4.15% gross/4.23% AER
Once again the best rates available elsewhere are better - 5.89% monthly/6.05% AER for 2-years, 5.79% monthly/5.95% for 3-years and 5.60% monthly/5.75% AER for 5-years.
NS&I doesn’t have to pay top rates to attract cash for a number of reasons – but in particular it is the unique level of protection that attracts wealthy savers.
So while the bank is not supposed to offer market leading rates which would mean commercial banks have to work even harder to raise the funds they need, as it is given a target of how much it needs to raise each tax year, it amends its rates accordingly. The current target is £7.5 billion – with a leeway of £3 billion either way and its latest results show that in the first quarter of the 2023/24 tax year the state-run bank has raised a net amount of £2.1 billion, so if this trend continued for the whole year, they would comfortably meet their target.
That said, according to the Bank of England, in June and July of this year NS&I has actually seen outflows of £300 million, which is very unusual. So this rate hike could indicate that they are worried they won’t actually be able to raise the amount they need. Whatever the reason, it’s good news for savers.
It's unusual to see NS&I at the top of the best buy tables, so seeing them leapfrog the top rates by such a margin is extraordinary. And it has had a small positive impact as a couple of providers have actually upped their offerings, although as a whole, fixed term bond rates have stalled somewhat and had actually been heading downwards a little. It would be good to think this move by NS&I will inject a little more competition, but I can’t see anyone challenging them for the top spot. I hope I’m wrong though!
@savingschampion
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