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NS&I increases interest rates on savings accounts – but they’re ‘nothing to shout about’ | Personal Finance | Finance

NS&I raised interest rates across a range of savings accounts last week in a “quiet” under the radar move last week.

Interest on the savings institution’s Direct Saver and income bonds have increased from 3.65 percent to four percent.

NS&I also launched its one-year British Savings Bonds at 4.5 percent.

While easy access rates have been dropping rapidly, people can still make more than five percent in a small handful of accounts. Meanwhile, people can earn up to 5.22 percent on accounts fixed for a year.

Sarah Coles, head of personal finance, Hargreaves Lansdown commented: “Savings rates have crept up a little at NS&I. They’ve kept it quiet, given the general election, but they’re not much to shout about anyway. You can do so much better elsewhere.”

The easy access Direct Saver rate has risen to four percent, but Ms Coles noted: “It’s still significantly off the pace of the best on the market.

“Accounts offering more than five percent are decidedly thin on the ground now, but there’s a whole raft of deals available at 4.9 percent or above, so there’s no need to settle for less.”

Meanwhile, Ms Coles said NS&I’s new one-year British Savings Bond risks dropping into a much bigger pool of more exciting rates “without making a ripple – let alone a splash”.

She explained: “At 4.5 percent, it’s well under the best on the market at 5.22 percent, and well off the rest of the pack leaders, which are still offering more than five percent.

The best rates on the market are available from smaller online banks and cash savings platforms, making these a “sensible place” to start when searching for a good deal.

NS&I also tends to appeal to savers with larger balances to invest, because cash held there is 100 percent protected by the Treasury.

However, Ms Coles said: “If you use a cash savings platform, you can spread your money across a number of institutions, so that the first £85,000 with each of them is protected by the FSCS, and you can still see everything in one place.

“It means even super-savers don’t have to settle for a middle-of-the-road rate.”

Speculating on why NS&I may have increased interest rates on savings accounts only marginally and not enough to be competitive, Ms Coles suggested: “It’s likely to be a sign that NS&I was keen to stem a flow of savers pulling cash out of the institution, so it has some relatively healthy numbers to report in July.

“The institution always has to balance the need to raise money against the need to offer value-for-money for taxpayers – while not distorting the savings market as a whole. It’s safe to say that these rates amply reflect its aim to be ‘good enough but not too good’.”

Express.co.uk has contacted NS&I for comment.

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