Eligible individuals may potentially secure a 5.15% savings rate on fixed bonds offered by NS&I, a well-known savings provider. The question is whether you fit the criteria.
National Savings and Investments (NS&I) has made a comeback in the savings market with the launch of new fixed bonds offering a competitive 5.15% rate. This rate is currently the best-fixed savings return on the market and the only one-year fixed bond above the current 5% base rate set by the Bank of England.
The new rates are available to existing NS&I customers who have been notified that their current Guaranteed Growth Bond is reaching its maturity date. Two options are available: the Guaranteed Growth Bond, which pays interest annually, and the Guaranteed Income Bond, which offers monthly payouts. The 5.15% rate is only applicable if customers fix for one year.
For a basic-rate taxpayer saving £20,000, the after-tax interest earned would be £1,024. Higher-rate taxpayers would earn £818, and those saving £50,000 would earn £2,575 in interest before tax.
It's important to note that the interest earned from the Guaranteed Growth Bond is not compounded and is paid into a separate nominated account. Also, the interest earned is backed by the Treasury, unlike a usual savings account that is only protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).
Customers will receive a reminder 40 days before their bond matures, and a 30-day reminder to enroll again and earn the 5.15% rate. If customers choose to fix for a longer term (2, 3, or 5 years), they will earn lower rates: 4.6% AER for 2 years, 3.35% AER for 3 years, and 4.1% AER for 5 years.
The current top one-year fixed bonds on the market, excluding NS&I's 5.15% offer, are Ford Money, Habib Bank Zurich, and Close Brothers, all offering a 5% AER.
The launch of these new fixed bonds comes after the Bank of England dropped the base rate to 5% in August, prompting NS&I to try to regain its competitive edge in the savings market. In April, NS&I launched its three-year fixed British Savings Bonds, but the one-year fixed British Bonds, with a 4.5% rate, were only available for two months before being withdrawn.
NS&I customers holding eligible fixed-interest investments issued before April 2021 are entitled to the current 5.15% redemption rate. This move by NS&I is a significant step towards offering competitive returns to its customers and encouraging savings in the current economic climate.
