The interest paid on both the Direct Saver and Income Bonds has risen from 1.2% Gross to 1.8% Gross. This is now the highest rate these accounts have offered in more than a decade.

Meanwhile, the rate on its Direct ISA has risen to 1.75%, from 0.9%, which is now the highest rate paid since February 2014.

The rate on the NS&I Junior ISA has risen to 2.7%, from 2.2%, and the rate on its Investment Account has also risen to 0.4%, up from a paltry 0.01%.

More than 2.7 million people who have savings accounts with NS&I – the government’s savings arm – will benefit from the rate rise.

Customers with fixed term saving products, including the off-sale Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates will also see rate hikes, but these come into effect from 1 December:

• Guaranteed Growth Bonds (1-year): From 1.85% AER/Gross to 3.6% AER/Gross
• Guaranteed Growth Bonds (2-year): From 2.25% AER/Gross to 3.65% AER/Gross
• Guaranteed Growth Bonds (3-year): From 2.55% AER/Gross to 3.7% AER/Gross
• Guaranteed Growth Bonds (5-year): From 2.55% AER/Gross to 3.8% AER/Gross
• Guaranteed Income Bonds (1-year): From 1.8% Gross/1.81% AER to 3.5% Gross/3.56% AER
• Guaranteed Income Bonds (2-year): From 2.2% Gross/2.22% AER to 3.55% Gross/3.61% AER
• Guaranteed Income Bonds (3-year): From 2.5% Gross/2.53% AER to 3.6% Gross/3.66% AER
• Guaranteed Income Bonds (5-year): From 2.5% Gross/2.53% AER to 3.7% Gross/3.76% AER
• Fixed Interest Savings Certificate (2-year): From 2.15% tax-free AER to 3.4% tax-free AER
• Fixed Interest Savings Certificate (5-year): From 2.45% tax-free AER to 3.55% tax-free AER.

How good are these NS&I rate rises?

Following the Bank of England’s latest base rate rise, which put interest rates at 2.25%, a host of savings providers have increased their rates.

While any interest rate rise is a bonus, the rates on offer from some providers are far higher than those paid by NS&I, with many of the market-leading accounts from challenger banks.

It’s widely expected that rates will rise further and therefore interest rates on savings accounts could also increase. While this is good news for savers, it is bad news for borrowers as it pushes up the cost of debt.

Premium Bonds rates boosted for October

It comes as the rate for Premium Bonds savers was also boosted from 1.4% to 2.2% for the October draw. This was the biggest single increase for 40 years.

The rise meant an additional £76m was added to the prize fund for October and the odds of each £1 Premium Bond number winning a prize improved from 24,500-to-one to 24,000-to-one.

There are often unclaimed Premium Bond prizes so to check if you’ve won, see the NS&I prize checker, the prize checker app or via an Alexa-enabled device. You’ll need your Premium Bonds holder number to check, and you can also see if you have any unclaimed prizes.

A ‘welcome boost’ to savings pots

NS&I chief executive, Ian Ackerley, said: “Today’s increases across our variable and fixed-rate products mean that our customers get a welcome boost to their savings.

“The changes come in the same month that we increased the Premium Bonds prize fund rate. Some of the rates we’re now paying – including on Premium Bonds – are the highest that they have been in over a decade, which is great news for savers.

“The changes to interest rates we’ve announced today will help ensure that our products are priced appropriately when compared to those offered by our competitors.”