National Savings & Investments (NS&I) has recently made some significant changes to its fixed-term savings accounts, including increasing interest rates and relaunching popular options for savers.

The organization has reintroduced its one-year and five-year British Saving Bonds, with the one-year option now offering a competitive rate of 4.05 per cent, and the five-year bonds paying 4.06 per cent. Previously, the five-year bonds had been removed from the product lineup in December when they paid 3.4 per cent.

Customers can choose between income and growth options for each account. With ‘growth’ bonds, any interest earned is added to the bond annually, while ‘income’ bonds pay the interest into the saver’s bank account monthly.

NS&I has also raised the interest rates for its two-year and three-year bonds, from 3.6 per cent to 4 per cent, and from 3.5 to 4.1 per cent, respectively. These new rates will apply to both new customers and existing customers with maturing bonds.

The decision to increase rates comes as NS&I announces a higher fundraising target for the current financial year. Despite expectations of a base rate cut by the Bank of England, NS&I is striving to offer competitive rates to its customers.

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the rate increases, stating that while they are a positive move in a market where rates are gradually declining, they still fall short of the most competitive rates available. Currently, the highest-paying one-year bonds in the market offer around 4.65 per cent interest.

There have been no changes to the rates for Premium Bonds announced at this time. The most recent rate cut for Premium Bonds, from 4 per cent to 3.8 per cent, was implemented in February.

It’s important to note that all NS&I accounts are backed by the Treasury. While interest earned on British Saving Bonds is taxable, Premium Bonds offer tax-free winnings. Additionally, funds invested in British Saving Bonds are locked in for the duration of the term and cannot be withdrawn early. Savers must initially invest a minimum of £500, with a maximum investment limit of £1 million per issue. At the end of the fixed term, customers can choose to withdraw their funds or reinvest them for another term.

Overall, NS&I’s recent changes to its savings account offerings provide customers with competitive rates and flexible options for their savings goals.