NS&I Interest Rate Rise

NS&I last week announced an increase to the interest rate on its Income Bonds, with the rise coming into effect on the same day.

Previously standing at 0.01 percent gross/AER, Income Bonds will rise by 14 basis points. It means as of Thursday November 18, Income Bonds will offer 0.15% gross/AER.

NS&I said the change aligns the interest rate for Income Bonds with the interest rate for NS&I's Direct Saver account.

The Government-backed savings provider said the decision for the increase is in line with NS&I’s operating framework to balance the interests of savers, taxpayers and the broader financial services sector. However, some have pointed out this new rate is a far cry from the most competitive easy access accounts right now, which currently offer 0.67%.

Commentators were quick to point out, though, that last year they went from offering the best rate by a country mile, to being among the worst. Now the rate has been boosted a little, but for a typical saver, it’s not enough to make them flavour of the month again.

At 0.15% it’s still way below the most competitive easy access account, offering 0.67%, so it is relying on the things that make NS&I special to draw the extra cash in. This includes its brand name and the fact that it is 100% backed by the Treasury.

In practice, however, you can hold up to £85,000 of savings with any institution, and your money is protected by the Financial Services Compensation Scheme, so for a typical saver, it is possible to do far better elsewhere. As such, the appeal may be limited mainly to those with big cash balances.

You can hold up to £1million in these bonds and it is all protected by the Treasury. For those with larger amounts of cash, the ease of being able to avoid spreading their cash over 12 separate institutions, in order to protect it, may be enough to persuade them that the loss of interest is worth it.