The UK government’s savings bank, NS&I, has “thrown down the gauntlet” to high street rivals by launching a one-year fixed-rate savings account paying a table-topping 6.2%.
Commentators said NS&I was likely to experience strong demand from savers keen for a decent return, as it means they get to secure a record rate that comes with a 100% Treasury guarantee.
On Wednesday the government-backed bank put on sale new issues of its one-year fixed-rate guaranteed growth bonds and guaranteed income bonds paying 6.2% and 6.03% gross interest respectively.
These new rates – available to new and existing customers – are the highest ever offered for these products since they first went on sale in 2008, and mean NS&I has overtaken challenger banks and others to take the top spot in the savings best-buy table for one-year fixed-rate deals.
The move comes after a crackdown on the UK savings market, which has seen many of the UK’s largest banks heavily criticised for passing on only a fraction of interest rate rises to their most popular savings accounts while sharply hiking mortgage and loan rates.
Sarah Coles, the head of personal finance at the investment platform Hargreaves Lansdown, said: “NS&I has gone all-in with the rates on these one-year bonds, and savers are likely to snap them up.”
The organisation usually offered rates “in the middle of the pack … so landing a rate at the top of the pile is quite a departure”, she added.
Myron Jobson, the senior personal finance analyst at the rival platform Interactive Investor, said this was a move that “throws down the gauntlet to high street banks” and was “a real statement of intent by NS&I amid persisting cost-of-living pressure which have prevented many from saving”.
However, the move is also linked to the fact that the spring budget in March set NS&I’s net financing target for this financial year at £7.5bn. This compared with a £6bn target for the previous tax year. A positive net financing figure represents a positive contribution to government financing.
Coles said the target for this year was “fairly punchy” considering that many people’s finances were under so much pressure that they were spending their savings to make ends meet.
The minimum investment for each new issue is £500, while the maximum is £1m. After the year is up, savers will have the choice of withdrawing their cash or reinvesting it.
