Our Savings are Shrinking

Interest rates are miniscule, but one bank is bucking the trend, says Paul Lewis

Father watching daughter count coins

How do I get the best return on my savings? For once, the answer is simple: National Savings & Investments (NS&I).  With some banks offering interest rates as low as 0.01% – meaning that if you give them £1,000 of your savings, you will get 10p a year in return – NS&I is topping the best-buy tables for the first time.

Advertisement

Not that NS&I rates are that marvellous: 1.15% for an instant access account or 0.9% for a cash ISA wouldn’t have set pulses racing six months ago. But as Covid-19
took hold, NS&I was instructed by the Government not to cut its rates, so it stands high above the water as the tide of savings rates ebbs away.  You may get slightly more if you tie your savings up for five years, but the premium of a few tenths of a percent may not be worth the risk that those rates you have locked into won’t look too special in 2025.

Among NS&I table toppers is a Junior ISA paying 3.25% and that 0.9% Direct ISA. It also has the top three places on instant-access savings: the Income Bond at 1.15%, which pays the interest monthly to a nominated bank account; the Direct Saver, which pays 1% and compounds the interest up; and the Investment Account paying 0.8%, which is matched but not beaten by some building societies.

For those with a lot of money in savings, NS&I is particularly attractive as it’s not subject to the normal upper limit of £85,000 that is guaranteed safe if a bank goes
bust. Money in NS&I is all safe, as the bank is state-owned and backed by the Treasury. You can put at least £1 million in each of the Income Bond, Direct Saver and Investment Account savings products.

NS&I has been told to raise £35 billion from savers this year, almost six times its previous target. If it reaches that, it may well lower the rates it offers. But for now your savings will at least be earning a return that you don’t need a magnifying glass to see. For more information, go to nsandi.com.

Paul Lewis presents Money Box on R4

Advertisement