Your feedback is essential to help us improve - click here to take our 3 minute survey.

NS&I boosts Income Bond interest rate: how does it stack up?

NS&I boosts Income Bond interest rate: how does it stack up?
Image source: Getty Images


National Savings and Investments (NS&I), the government’s own savings brand, has boosted the interest rate on its Income Bonds.

So how does the new rate compare with other easy access savings accounts? Let’s take a look.

How do NS&I Income Bonds work?

Despite its rather confusing name, the NS&I Income Bond is very similar to a normal easy access savings account. Anything you save in the account earns a variable rate of interest. This means the rate can change at any time, though you’ll be contacted in advance if it drops.

To open an NS&I Income Bond you’ll need to deposit at least £500, and keep at least this amount in the account for it to remain open. You can open and manage the account online, by phone, or by post. 

The main difference between the NS&I Income Bond and a normal savings account is that anything you deposit into NS&I is fully protected by HM Treasury. This is the strongest level of protection you can possibly get.

In contrast, save in a normal savings account and you’ll have to rely on FSCS protection, which only covers your cash up to £85,000. For more on this point, see our article that explains whether NS&I accounts are safer than normal savings.

What is the new interest rate on the NS&I Income Bond?

NS&I has increased the interest rate on its Income Bond from 0.01% to 0.15% AER variable. While this is a move in the right direction, it’s not really much of a lifeline for savers. This sentiment is echoed by Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

She explains that NS&I remains a dirty word among savers after it decided to slash rates at the end of the last year: “NS&I Income Bonds left a nasty taste in the mouth for an awful lot of savers 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. Income Bonds were the highest paying easy access accounts for much of last year, but savage cuts in November 2020 meant they were slashed from 1.15% to 0.01%”.

How does the NS&I Income Bond compare?

At 0.15% AER variable, the NS&I Income Bond is a long way off being the highest-paying easy access savings accounts.

Right now, you can earn 0.67% AER variable through Shawbrook Bank. If that’s not for you, then you can earn yourself a slightly lower 0.66% AER variable with Cynergy Bank. Alternatively, if you’d prefer to stash your cash with a big name, Nationwide pays 0.45% AER variable, though you can only make three withdrawals a year from this account. If you make more, you’ll earn just 0.01% interest.  

Despite the fact that the NS&I Income Bond falls short of other easy access savings accounts in the market, it’s fair to say that some savers will be attracted to the government-backed provider’s extra savings safety protection.

This may be especially true for those with large amounts of cash, as Sarah Coles explains: “The appeal [of N&SI Income Bonds] may be limited mainly to those with really big cash balances.

“You can hold up to £1 million in these bonds and it’s 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.”

For more options on where to save your money, see our top-rated easy access savings accounts.

Looking to further boost your interest rate? You may wish to lock away your money for higher returns. See our top-rated fixed savings accounts for a list of options.

Paying credit card interest? Time to switch to a 0% balance transfer card.

If you can’t afford to clear your credit card balance at the moment and are paying monthly interest, then check to see if you can shift that debt to a new credit card with a long 0% interest free balance transfer period. It could save you money.

By transferring the balance of any existing card (or cards) to a new 0% card, you could be debt-free more quickly – since your repayments will go entirely towards clearing the balance of the debt you owe, and not on interest charges.

Discover our top-rated picks for 0% balance transfer credit cards here and check your eligibility before you apply in just a few minutes – it’s free and won’t affect your credit score.

Was this article helpful?
YesNo

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.