NS&I announced earlier this month that they would increase interest rates on its Direct ISA, Direct Saver and Income Bonds products on December 29. Despite the rate hike, many still criticized NS&I for falling short of its competitors.
Direct savings account
A Direct Saver account is an easy-to-access account, which generally offers less interest than fixed accounts, however, the 20 basis point hike will increase the interest rate from 0.15% to 0.35%.
This account will see the biggest increase by the end of the month, going from 0.10% to 0.35%.
As with all ISAs, savers can set aside up to £ 20,000 without paying interest tax, but they are cautioned that this limit takes into account all the different types of ISAs they have.
Income bonds offer easy access with monthly interest payments straight to one’s bank account.
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These have been increased by 20 basis points from 0.15% to 0.35%, however, they require a minimum of £ 500 to open the account and a maximum of £ 1million per person.
NS&I is owned by the Treasury and has an annual net funding target, which for fiscal year 2021 to 2022 was £ 6 billion.
However, in October 2021 the year-to-date total was insanely short at just £ 0.6bn.
The rate hike should help NS&I cross the fine line between offering competitive interest to keep and getting more customers while not losing profits.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said the increase may not be enough to cover NS&I’s shortcomings on their annual targets.
She commented: “NS&I aims to attract more savers and avoid exceeding its fundraising target for the second year in a row. However, these new rates are still only half as attractive as the most competitive on the market, so for most savers there is a risk that they will miss the mark.
“At 0.35%, these rates are still far from the best in the market. You can currently get up to 0.71% on easy access savings and 0.67% on an easy access cash ISA, so you are sacrificing almost half of the lead in order to reap the benefits. of the NS&I brand.
Andrew Hagger of Moneycomms said the current best interest rates for easy-to-access accounts are:
- Investec Bank Online Flexi Saver – 0.71 percent
- Cynergy Bank – Easy online access – 0.70%
- Shawbrook Bank – Easy Access – 0.67 percent