NS&I deals you should steer clear of

IF YOUR fixed-interest certificate with National Savings & investments (NS&i) is about to come to an end, it could pay to look elsewhere for a better deal.

Savers re-investing their money earn as little as 0.9 pc with NS&i, but they can double their return to 1.8 pc after tax (2.25 pc before) with top-paying banks.

Fixed interest Savings Certificates have £4.4 billion tied up in them. their big attraction is that all interest is exempt from tax.

But suddenly this has been stripped away because the cash isa allowance has almost tripled in the past year, and from next april basic-rate taxpayers will be allowed to earn £1,000 interest on their savings tax-free.

the allowance for higher-rate payers will be £500.

the cash isa limit — where interest is tax-free — is now £15,240 for this tax year.

On top of this, savers on incomes of less than £15,600 already pay no tax on their interest in non-isa accounts. From next april this rises to £16,800.

danny Cox, from independent advisers Hargreaves Lansdown says: ‘ Savers with maturing Fixed interest Savings Certificates should see if they can do better elsewhere following changes in tax and the increased cash isa allowance.’

at adviser Chase de Vere, Patrick Connolly says: ‘depending on your tax position, there is a strong argument for getting out of Fixed interest Savings Certificates. But stay in the index-Linked version, which is the only savings account which gives you full protection against inflation.’

Fixed interest Savings Certificates were withdrawn from sale for new savers in September 2011.

those who already hold them can roll them over into another certificate for the same term. those who bought the 51st issue of the twoyear version, which start to mature this week have earned £230 on a £10,000 sum.

if you roll over into the current 52nd issue, your interest will drop by £50 to £180 for the next two years. the current fiveyear version, issue 102, at 1.6 pc means a 29 pc drop from the 2.25 pc in the maturing 96th issue.

Non-taxpayers and those within the £ 1,000 personal savings allowance can double the twoyear return by going for a toppaying bank or building society.

if you haven’t used your full £15,240 cash isa allowance for this tax year, look at fixed-rate cash isas. top two-year fixed deals come from Kent reliance and Shawbrook banks at 1.85 pc.

even in the High Street you can earn twice as much with Nationwide’s 1.8 pc fixed for two years.

top one-year fixed-rate cash isas include Nationwide and Shawbrook Bank both at 1.65 pc.

Or you can go for a taxable bond and make use of the new personal savings allowance which will be in place by the time you get your interest. On its two- year fixed- rate bond, Charter Savings Bank now pays 1.8 pc after tax (2.25 pc before) for new savers (see ‘New banks offer best bond rates’, above left). at 2.25 pc you can put £40,000 into the bond and take £900 interest a year — £1,800 over two years — which you can offset against the £1,000 personal savings allowance and pay no tax. With NS&i you’ll earn just £720 tax-free interest over the two years on the same sum.