These 4% savings bonds pay best rates in three years

They are likely to prove highly popular among savers, especially those who want to avoid taking any risks with their money.

Yet savers could get a slightly higher return by shopping around. Is it worth it, though?

The newly launched savings bonds come with added peace of mind, too, as they are issued by National Savings & Investments (NS&I).

This means they have the backing of HM Treasury, which has never reneged on its debts, making them the safest investments around.

NS&I is on a roll right now after hiking its Premium Bonds prize rate to a 14-year high of 3.15 percent.

That is more than triple the one percent it paid this time last year and beats every easy access savings account.

Premium Bonds are not directly comparable with savings accounts, though, because what you get is down to the luck of the draw.

It’s a different matter with the relaunched NS&I one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds, which were last on sale in 2019.

The growth bond pays a fixed rate four percent a year while the income bond pays 3.90 percent, the highest NS&I has paid on these two products since 2010.

Minimum investment is £500 in each issue, with the maximum £1million. At maturity after one year, savers can either withdraw their cash or reinvest. They cannot access their funds in the interim.

Almost 500,000 existing NS&I customers with one, two, three or five-year Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates accounts can access the new rates if they reinvest at maturity. 

The two, three and five-year products remain closed to new customers.

The new NS&I one-year bonds will be welcomed by savers amid signs that rates have started to slip lately, despite the Bank of England hiking base rates for the tenth time in a row to four percent last Thursday.

Hargreaves Lansdown senior analyst Helen Morrissey said: “Savers need to get the most they can from every penny, especially if they are looking to lock it away for a period of time, and these products are competitive.”

Morrissey said NS&I’s Treasury-backed guarantee will continue to reassure savers. “Especially those with larger sums who would exceed the Financial Services Compensation Scheme (FSCS) cap of £85,000.”

READ MORE: Expert raves about 4.40% savings account as ‘best you can get’

Myron Jobson, senior personal finance analyst at Interactive Investor, called the new rates “another shot in the arm” for the NS&I product range. “It follows recent NS&I moves to hike rates on its Direct Saver and Income Bonds from 2.30 percent to 2.60 percent, while its tax-free Direct Isa rises from 1.75 percent to 2.15 percent.”

NS&I also increased the interest rate on its Junior Isa from 2.70 percent tax-free to 3.40 percent, benefiting 80,000 under 18s. Yet these are far from market leading, Jobson added. “As always, it pays to compare rates and shop around for the best savings.”

It is possible to get more than four percent from a one-year fixed rate bond, with SmartSave paying a best buy rate of 4.17 percent at time of writing, while Atom Bank and Close Brothers both pay 4.15 percent. 

More cautious savers may be reluctant to use these little-known challenger banks, but they also benefit from full FSCS protection on the first £85,000 deposited.

Despite that, many will still prefer NS&I, particularly pensioners who have snapped up its bonds before.

Jobson said it is possible to get more interest if you can lock your money away for five years.

Over that extended term, Atom Bank pays 4.45 percent and Ford Money pays 4.40 percent a year.

Unfortunately, today’s best buy savings rates are mostly available online. That also applies to NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds. 

Savers can still apply for Premium Bonds by post, though.

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