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NS&I pulls in £7.7bn from savers in September after launching best ever bond rate

NS&I pulls in £7.7bn from savers in September after launching best ever bond rate
Matt Browning
Written By:
Matt Browning

Savers deposited record sums into National Savings and Investment (NS&I) accounts following the launch of its 6.2% saver

According to the latest Bank of England Money and Credit figures, households deposited £7.7bn into NS&I accounts in September – the highest level since August 2020, when savers topped up their funds during lockdown.

This meant that the Government-backed savings vehicle hit its fundraising target for the entire year in one month.

Over the month, NS&I offered its highest-ever interest rate for its one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds.

New issues of the NS&I bond were set at 6.20% gross/AER and 6.03% gross/6.20% AER respectively.

Nearly a quarter of a million savers snapped up the market-leading NS&I bonds before they were withdrawn from sale.

NS&I’s plan worked

Laura Suter, head of personal finance at AJ Bell, said: “NS&I’s plan to top the best buy tables to boost its previously lacklustre inflows did the trick, and the Government-backed provider saw its highest inflows in more than three years. Customers rushed to lock in the 6.2% one-year fixed rate bonds, with £7.7bn of money put into the accounts in September.

“[However], having clinched its fundraising needs, it’s now unlikely we’ll see another bumper interest rate from NS&I this tax year. Unless it suffers heavy outflows or the government changes its targets, it won’t need to offer a market-beating rate to draw new customers in.

Mark Hicks, head of active savings, Hargreaves Lansdown agreed with the assessment.

He said: “A wall of money rushed into NS&I in September. It dominated the one-year-fixed rate market and hoovered up cash maturing from the dash into fixed-rates a year earlier. At a time when so many people are spending their savings, NS&I had a mountain to climb to hit its fundraising targets. This account has helicoptered them in near the summit.”

Myron Jobson, senior personal finance analyst, interactive investor, said: “The sheer number of people who subscribed to the [NS&I] accounts is unheard of, and is undoubtedly the key reason behind the sharp rise in cash moving into the NS&I last month – the highest since August 2020 at the height of the ‘accidental savers’ phenomena during the Covid-19 pandemic. The NS&I became a victim of its own success and ultimately pulled the market leading one-year fixed rate savings deals from market at the start of October.”

Overall savings fall

Meanwhile, overall savings into fixed rates bonds fell in September. A total £5.3bn flowed into fixed rate bonds with banks and building societies during the month – down from £8bn in August

Experts noted that this was largely down to the NS&I effect.

Suter said: “NS&I has clearly been eating some of the other banks’ lunch, as flows into fixed rate bonds with banks and building societies slowed in September.”