You are here: Home - Saving & Banking - News -

NS&I increases interest rate on income bonds

Written by: Emma Lunn
National Savings and Investments (NS&I) has increased the interest rate on its Income Bonds by 14 basis points, from 0.01% gross/AER to 0.15% gross/AER.

This change aligns the interest rate for income bonds with the interest rate for NS&I’s Direct Saver account.

NS&I said the decision to increase the interest rate on income bonds is in line with NS&I’s operating framework to balance the interests of savers, taxpayers and the broader financial services sector.

Anna Bowes, co-founder of, said: “NS&I has seen enormous amounts of cash being withdrawn since the provider cut the rates on its savings accounts last year. So much so that in the first six months of the financial year, NS&I has only raised £600m of an annual target of £6bn.

“As a result, there was always a possibility that a rate rise of some description was on the cards. But also as expected it’s not a huge increase and actually only brings the rate up to the same level as the Direct Saver – and is still not competitive at all. That said, this will be good news for those who, for one reason or another, have decided not to move their cash, and at least it’s a better rate than you can earn with a high street bank.

“Whether it has the desired result and NS&I starts to attract money again, we’ll have to wait and see. Will there be more increases on the table? What NS&I will want to avoid is to attract too much money, so it’ll have to be a careful balancing act.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “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’s 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, you can do far better elsewhere.

“The appeal may be limited mainly to those with really big cash balances. You can hold up to £1 million in these bonds and it’s all protected by the Treasury. For those with enormous 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. Appealing to these savers may bring NS&I closer to its targets, but it has done nothing to help everyday savers, hunting for a more rewarding place for their money.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Privacy Preference Center