National Savings and Investments (NS&I) has overhauled its interest rates on fixed-term savings accounts.
The bank has increased its rates for its one, two, three and five-year British Savings Bonds.
Savers can now earn an interest rate of up to 4.75 per cent if they fix for five years, and as much as 4.72 per cent if they lock in for just one year.
NS&I is government-backed, meaning all investments are protected by HM Treasury. It means customers won’t lose their money even if the bank collapses, making it one of the safest investments on the market.
Savers can take advantage of two different types of bonds with the bank: guaranteed growth bonds or guaranteed income bonds.
The first sees customers save a lump sum of money and earn a fixed rate of interest over the agreed fixed-term period.
Meanwhile, the latter pays out on a monthly basis at a fixed rate for the duration of the deal.
The improved interest rates apply for both those opening new accounts and those with already maturing investments.
NS&I’s Retail Director Andrew Westhead said the improved products would give customers knowledge of the rate of return they would see, while also having the security of knowing their investments were backed by the Government.
“Savers can now choose from improved fixed-term rates across our one, two, three and five-year British Savings Bonds, with the certainty of knowing exactly what return they will receive over their chosen term,” he explained.
“Alongside that certainty, customers continue to benefit from the reassurance that all money invested with NS&I is 100 per cent secure and backed by HM Treasury.”
Those looking to take advantage of one of the NS&I fixed term bond products must make a minimum investment of £500, while there is a ceiling of £1million per product per person.
Despite the safety of NS&I as an investment, the bank has seen a decrease in the number of Brits taking advantage of its products in recent years.
Instead, savers have taken advantage of better rates being offered by alternative providers.
Sarah Coles, head of personal finance at AJ Bell, said it therefore wasn’t a surprise to see the action being taken by NS&I in a bid to become more attractive to customers.
She explained: “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.”
NS&I made the announcement after the Bank of England’s Monetary Policy Committee, led by Governor Andrew Bailey, confirmed on Thursday that the base rate of interest would be frozen at the current rate of 3.75 per cent.
The Monetary Policy Committee meets approximately every six weeks to review the base rate of interest and to vote on whether it should be increased, decreased or remain the same.
The next meeting is due to take place on Thursday, September 17.
