NS&I to increase interest rates today – how changes compare to best savings accounts

NS&I announced earlier this month that they would be raising interest rates on its Direct ISA, Direct Saver and Income Bonds products on December 29. Despite the raise to the rates, many have still criticised NS&I for coming up short in comparison to its competitors.

Direct Saver account

A Direct Saver account is an easy access account, which generally offers less interest than fixed accounts, however, the 20 basis point rise will increase the interest rate from 0.15 percent to 0.35 percent.  

Direct ISA

This account will be seeing the biggest increase by the end of the month, going from 0.10 percent to 0.35 percent.

As with all ISAs, savers can put away up to £20,000 without paying tax on any interest but they are cautioned that this limit takes into account all of the different types of ISAs one has.

Income Bonds

Income Bonds offer easy access with monthly interest payments directly into one’s bank account. 

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These have been raised by 20 basis points from 0.15 percent to 0.35 percent, however, they require a minimum of £500 to open the account and a maximum of £1million per person. 

NS&I is owned by the Treasury and is provided with an annual Net Financing target, which for the financial year from 2021 to 2022 was £6billion. 

However, as of October 2021 their year to date total fell incredibly short with only £0.6billion. 

The increased rates should help NS&I tread the fine line between offering competitive interest to keep and get more customers whilst not losing profits. 

Senior personal finance analyst at Hargreaves Lansdown, Sarah Coles, said the raise still may not be enough to cover the shortcomings of NS&I on their annual targets.

She commented: “NS&I is raising its sights to bag more savers and avoid undershooting its fundraising target for the second consecutive year. However, these new rates are still only around half as rewarding as the most competitive on the market, so for most savers, there’s a risk they’ll miss the mark. 

“At 0.35 percent, these rates are still far from market-leading. You can currently get up to 0.71 percent on easy access savings and 0.67 percent on an easy access cash ISA, so you’re sacrificing almost half of the potential interest in order to gain the benefits of the NS&I brand.”

Andrew Hagger from Moneycomms shared that the current best interest rates for easy access accounts are:

• Investec Bank Online Flexi Saver – 0.71 percent 
• Cynergy Bank – Online Easy Access – 0.70 percent
• Shawbrook Bank – Easy Access – 0.67 percent