National Savings & Investments (NS&I) recently offered its highest ever 1-year Guaranteed Growth Bond, paying 6.20% AER. Unfortunately, it has now been withdrawn, but during the five weeks that it was available, nearly a quarter of a million savers deposited an extraordinary £7.7 billion, according to the latest Bank of England Money and Credit figures.
This figure is significant because it means that the government-backed bank has hit its target for the 2023/24 tax year in just one month. It’s the highest level of deposits taken since August 2020 when NS&I was once again at the top of the best buy tables, that time with its easy access Income Bonds account.
Each year, NS&I is given a ‘net financing target’ which is the amount of money it is tasked to raise for the government, allowing for any money that might also be withdrawn. And for the 2023/24 tax year, that target is £.7.5 billion – with a leeway of £3 billion either side.
It had already raised the rates on several account numerous times over the last few months in order to stem the outflows it had seen. In June and July of this year outflows of £300 million was recorded, triggering the need for something special – which came in the guise of the market leading bond.
Whilst it was great news for all those who were able to access this bond before it was withdrawn, with six months to go before the end of the financial year, it’s unlikely that we’ll hear any more good news from NS&I unless there are more heavy outflows, or the government increases the target.
What’s next for fixed term bonds?
Whilst there was some positive impact on the rest of the 1-year bond market when NS&I launched the 6.20% bond, none of the other banks were able to knock NS&I from its perch – and it likely stole a share of the savings market from other providers, as flows into fixed rate bonds with banks and building societies slowed in September to £5.3 billion – a sharp drop from £8 billion in August.
However, the removal of the bond has clearly had a negative impact on the rest of the market. Top rates have been falling, and while there were 29 1 to 2-year bonds paying 6% or more at the beginning of September, just after the NS&I bond was launched, at the time of writing, there are now just six!
And with the base rate on hold again, it really does feel like we have reached a peak – or are certainly very close to it.
So, with rates coming down, now could be the last chance for a while to bag a bond paying 6% AER. Take a look at our best buy tables to see what’s available.