NS&I launches fixed savings account paying 4.72% backed by the government

NS&I has boosted the interest sates on its fixed savings accounts in good news for savers looking to lock their money away safely. The government-backed bank, which operates popular Premium Bonds, where you have a chance to win prizes on your cash, has increased the rates on its one, two, three and five-year fixed accounts. That takes the top interest rate on the accounts, known as British Savings Bonds, to 4.75% if you fix for five years, or 4.72% if you lock in for one year. The exact interest rate depends on the bond issue, with rates ranging from 4.59% up to 4.75%. Sign up for the Money newsletter Thank you! There are two types of bond – guaranteed growth bonds or guaranteed income bonds. Growth bonds are where you save a lump sum and earn a fixed interest rate over the period, whereas income bonds pay out a monthly income at a fixed rate for the duration of the term. Sarah Coles, head of personal finance at AJ Bell, said the move comes as NS&I has seen a drop in the number of customers piling their cash into its savings accounts. The accounts are considered to be some of the safest places to put your money as they are backed by the government, so you won’t lose your money if the bank goes bust. But competitive interest rates over the past few years have meant some savers have been tempted by better rates at rival savings providers. “NS&I has sharpened up its fixed rates to attract more savers. This isn’t a surprise,” Ms Coles said. Most read in Money “The first three months of its financial year haven’t seen it attract vast swathes of cash. Savers have better options elsewhere in a hugely competitive market. “At a time when deals are getting better and the future of interest rates is so uncertain, more people are opting for the certainty of a fix, and NS&I could take a slice of this pie.” She added that if the rises don’t bring in more customers, it could prompt NS&I to hike the prize rate on its popular Premium Bond accounts. Make sure you compare the rates offered on accounts so you get the best return on your money Credit: Getty Are fixed savings accounts a good idea? The interest rates offered on fixed savings accounts are typically higher than those offered on instant access accounts, where you can take your money out whenever. You get a higher rate in exchange for locking your money away for the fixed period, so it’s a good idea if you have savings you don’t need to touch. But it’s worth bearing in mind that once your money is in there, you won’t be able to touch it or may face a penalty if you need to take it out. In the past, interest rates tended to be higher on longer fixed terms, but this is based on what experts think will happen to interest rates over the long term. At the moment, there is uncertainty around whether rates will remain high or could start to fall if the Bank of England makes changes to its base rate, which sets rates. So, there is currently not much difference between a one and five year fix. However, if you fix for one year and rates fall, you could lose out long term. Make sure to compare savings accounts before choosing the right one for you so you can get the best rate and flexibility you need. Comment now