NS&I has been tasked with raising more money in the next tax year, from the current £6bn benchmark to £7.5bn.

This net financing target of £7.5bn in 2023/24 – within a range of plus or minus £3bn – “reflects NS&I’s requirements to balance the interest of its savers, the taxpayer, and the wider financial services sector”, the statement in the Budget read.

Now, this technical change essentially means NS&I will need to encourage additional deposits into its savings products, and as such, it could mean rates are set to rise, according to Laura Suter, head of personal finance at AJ Bell.

Suter said: “The Government wants its savings provider NS&I to raise even more money in the next tax year. Currently, the Government-backed provider was tasked with taking in £6bn of savers money but this has now risen to £7.5bn.

“While this might seem like a very technical point, what it means is that NS&I will have to make its products more attractive to savers – which equates to higher interest rates for savers. It also means the premium Bond prize fund will undoubtedly be boosted again, to lure in more savers.”

The Premium Bonds prize fund rate currently stands at 3.3%, having risen five times in the past year.

It has also recently upped interest rates on the Direct Saver and Income Bonds for 600,000 customers, while its latest release of Green Savings Bonds offer 4.2% over a three-year term. Earlier this year, it also released new issues of one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds.

Start of a savings rate war?

Suter added: “While the funding target is nowhere near the £35bn set during the pandemic, we can expect NS&I to go back to its pandemic playbook and significantly boost rates across the majority of its accounts.

“Generally, it doesn’t want to lead the markets, but this goes out the window if it needs to drag in more of savers’ money. This has a double boost for savers, as they can get higher rates with the Government-backed provider but also it will spur other savings providers to increase their rates – hopefully marking the start of another rates war.”