- It could be a good time to lock in this top rate from NS&I
- But the interest is taxable
National Savings & Investments (NS&I) has increased the rate on its one-year bonds, making it the highest-paying account on the market.
The institution’s ‘guaranteed growth bonds’ and ‘guaranteed income bonds’ now pay an annual equivalent rate of 6.2 per cent, up from 5 per cent and 5.12 per cent respectively. The best one-year bonds available, offered by Investec Bank and Close Brothers Savings among others, pay 6 per cent, according to research firm Moneyfacts.
NS&I's one-year deals also return more than the best buy two-year and three-year deals, which offer a maximum of 6.05 per cent and 6 per cent, respectively.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said this is a departure from NS&I’s usual strategy of offering rates “in the middle of the pack”. It could be especially attractive for people who locked in their savings about one year ago, when rates boomed after the mini-Budget, and are now looking for new opportunities, she added.
With interest rates approaching their peak, it could be a good time to lock into NS&I's deals, although it remains hard to accurately predict how rates will move over the next few months.
NS&I’s bonds are guaranteed by the Treasury and savers can invest between £500 and £1mn per issue. NS&I is also increasing the rates on its two, three and five-year bonds, which are not on sale for new customers but are available to those who already have a maturing bond with NS&I.
With guaranteed growth bonds, interest is added to the bond on each anniversary of the investment, while income bonds can be useful for pensioners because the interest is regularly paid into the holder’s bank account.
However, unlike with NS&I's Premium Bonds, the interest received counts towards the saver’s personal savings allowance and is taxable if the allowance is breached. Last week, NS&I also launched a new issue of its three-year 'Green Savings Bonds', increasing the interest rate to 5.7 per cent from 4.2 per cent.
