🔔 NS&I announces exclusive 1-year rate, for existing 1-year customers

It’s the news we’ve been waiting for – and for the 220,000 savers that managed to grab the top paying National Savings & Investments (NS&I) 1-year Guaranteed Growth and Guaranteed Income Bonds last year, you’ll not be too disappointed with the rollover rate on offer.

On 31st August last year,  NS&I made an extraordinary move – launching Issue 72 of its 1-year Guaranteed Growth Bond paying 6.20% AER – or 6.03% for the Guaranteed Income Bond for those who wanted monthly income. At the time, this was head and shoulders above the competition and as a result over £10 billion was deposited in just five weeks.

And now we know that NS&I will offer customers with maturing Guaranteed Growth and Guaranteed Income Bonds a rollover rate of 5.15% AER, or 5.05% gross monthly.

We’ve been wondering what NS&I will offer those savers as their bonds mature. Would it be competitive or a damp squib. The reason we were worried that it would be the latter was because National Savings & Investment’s (NS&I) released its latest Annual Report this week – for the 2023/24 tax year.

Amongst all the announcements made, what we consider to be the key one is that it took in a net amount of £11.3 billion of money from savers (so this is the amount after deducting how much was withdrawn). This is important because it means that NS&I overshot its target by over £1bn and that could impact the savings rates on offer from NS&I going forward.

As a government department, each year NS&I is targeted with an amount it’s supposed to raise, by offering cash savings accounts. This is called the net financing target and for the tax year 2023/24 that was set at £7.5 billion, with a leeway of £3 billion either way.

Even with this generous leeway, NS&I massively missed its target, attracting a net amount of £11.3 billion. And this follows a similar situation in 2022/23 when it delivered a net amount of £10 billion against a target of £6 billion, overshooting again even after allowing for the same leeway of £3 million.

There was a point last year that NS&I was in danger of not raising enough following massive withdrawals in June and July, so they made a series of increases, including hiking the rate on the Premium Bond prize fund multiple times.

In its report, NS&I stated that “NS&I was on track to meet its net financing target in December 2023; however, while substantial, repayments to customers in January and February 2024 did not materialise to the levels anticipated” In other words, NS&I customers did not withdraw the amount of cash that the state bank was expecting, a blow considering how much it had taken in with the market leading 1-year bond paying 6.20% AER.

Even a subsequent reduction to the Premium Bond rate to 4.40%, announced in January this year, wasn’t enough to encourage savers to cash in their bonds.

But it seems that NS&I is keen to hang onto many of its maturing bond customers as the rates they have been offered are competitive, although you can currently earn more elsewhere.

The top 1-year bond currently available is with Union Bank of India, who is offering a rate of 5.40% and there are several more paying 5.25% and 5.20%.

Those with very large deposits in the bond may choose to leave their money with NS&I in order to avoid the hassle of splitting their cash to keep it protected. But is that the best thing to do?

As I’ve been saying for some time now, with interest rates beginning to fall, if you can tie some of it up for longer, you could well feel really pleased with yourself in a year or two, when you have cash still locked in at current rates.

And the advent of cash platforms can help with making the opening of multiple savings accounts easier.

By signing up to a cash platform, you can distribute funds across several providers and accounts without the need to apply to each bank individually, which can help you to stay within the Financial Services Compensation Scheme (FSCS) protection limits.

A single application onto the platform provides a single point of access allowing you to view and manage all your savings accounts; you can easily find competitive interest rates, move money between accounts and monitor the overall performance of your savings, without juggling multiple logins and statements - simplifying the management process and allowing you to focus on building a balanced savings portfolio.

We’ll be back later in the month when we know more about how the new NS&I bonds stacks up compared to the rest of the market, and with some top tips.