NS&I last week announced an increase to the interest rate on its Income Bonds, with the rise coming into effect on the same day. Previously standing at 0.01 percent gross/AER, Income Bonds will rise by 0.14% It means that, as of Thursday November 18, NS&I Income Bonds will offer 0.15% gross/AER. NS&I said the change aligns the interest rate for Income Bonds with the interest rate for NS&I’s Direct Saver account. The Government-backed savings provider said the decision for the increase is in line with NS&I’s operating framework to balance the interests of savers, taxpayers and the broader financial services sector. However, some have pointed out this new rate is a far cry from the most competitive easy access accounts right now, which currently offer 0.67%. Commentators were quick to point out, though, that last year they went from offering the best rate by a country mile, to being among the worst. Now the rate has been boosted a little, but for a typical saver, it’s not enough to make them flavour of the month again. At 0.15% it’s still way below the most competitive easy access account, offering 0.67%, so it is relying on the things that make NS&I special to draw the extra cash in. This includes its brand name and the fact that it is 100% backed by the Treasury. In practice, however, you can hold up to £85,000 of savings with any institution, and your money is protected by the Financial Services Compensation Scheme, so for a typical saver, it is possible to do far better elsewhere. As such, the appeal may be limited mainly to those with big cash balances. You can hold up to £1million in these bonds and it is all protected by the Treasury. For those with enormous amounts of cash, the ease of being able to avoid spreading their cash over 12 separate institutions, in order to protect it, may be enough to persuade them that the loss of interest is worth it.
Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of November 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.