Good news for savers as NS&I’s 4% rates on Guaranteed Growth and Income Bonds return… and experts are predicting a stampede
Savers are being offered the best interest rates on a one-year National Savings account since 2010.
The government-backed savings giant NS&I has brought back its Guaranteed Growth Bonds and Guaranteed Income Bonds for the first time in three years.
Experts are already predicting they will be ‘very popular’ and could sell out, with NS&I refusing to guarantee they will be on offer for long.
Anna Bowes, financial expert at comparison website Savings Champion, said: ‘With best-buy fixed rates falling recently, these rates are competitive. They are likely to be very popular, so could be withdrawn pretty quickly.’
The accounts could pile pressure on big banks to increase the rates on their savings products. The only high street giants with comparable one-year fixed rates are Barclays paying 3.9 per cent and Nationwide Building Society with 3.75 per cent.
Savers are being offered the best one-year National Savings account interest rates since 2010
NS&I is a widely trusted household name – more than 22 million people hold NS&I-issued Premium Bonds.
The new accounts can be opened with £500 and are guaranteed up to £1 million. This will make them popular with wealthy savers as banks and building societies cover only £85,000 of savers’ cash as part of the Financial Services Compensation Scheme.
The Guaranteed Growth Bond pays 4 per cent interest on the anniversary of the account, while the Guaranteed Income Bond pays out 3.9 per cent as monthly income.
These are some way off matching inflation, which currently sits at 10.5 per cent. But the 4 per cent rate is likely to be on par with the Bank of England base rate, which City experts expect will rise 0.5 percentage points today.
Andrew Hagger, of comparison website MoneyComms, said: ‘With interest rates on a different level compared with 12 months ago, savers can once again earn a meaningful monthly return in the current market.’
The NS&I accounts are not tax free and could bust savers’ personal savings allowance (PSA).
The first £1,000 of all interest earned by basic-rate taxpayers on savings is tax-free.
On the Guaranteed Growth Bond, a balance beyond £25,000 would result in interest that breaches this.
For higher-rate tax payers, the allowance is lower at £500, meaning a deposit of £12,500 would result in busting the PSA.