Now National Savings pays the best rates

SAVERS searching for a better deal should look to Government-backed National Savings & Investments.

While big banks have embarked on a rate-cutting frenzy in recent weeks, NS&I rates have been left untouched.

This is because, unlike the banks, the £135 billion-strong firm wants your money.

For its next financial year — which starts on April 1 — it aims to attract up to £11 billion of new money from savers.

This is up from an original goal of £6 billion.

So, in a bid to entice savers, it has allowed its rates to float to the top of the best buy tables.

NS&I’s easy-access Direct Isa, available online or over the phone, pays 1pc — the highest rate on variable accounts.

You can’t move existing cash Isas into this account — but you can put £15,240 in this tax year, which runs until April 5 (assuming you haven’t used your allowance).

In the next tax year, starting April 6, you can add up to £20,000.

NS&I’s Direct Saver easy-access account pays 0.8pc, which is also among the leaders and much better than the 0.01 pc offered by a number of big banks.

Its Income Bonds, which pay out interest each month, offer a top 1pc. You have easy access to your money, though the minimum you can take out is £500 and you must keep at least £500 invested.

NS&I’s popular Premium Bonds pay out tax-free monthly prizes at a rate of 1.25 pc a year of the money held in them.

The odds of winning each month on every £1 you hold is 30,000to-one. Last month, more than 2.2 million of prizes were handed out, totalling £68.9 million.

NS&I also has the only deal that links the return of your money to the rise in the cost of living, which is expected to burst through the 2pc target level this year from its current 1.6 pc.

But these indexlinked savings certificates are available only to those who already hold them.

Despite not being on general sale since September 2011, there is still £23.3billion tied up in them. This makes them the second most popular product with NS&I after Premium Bonds at £67.5 billion.

Existing holders can reinvest their money at the end of their two, three or five-year term.

Those with a three or five-year term can renew at the same length or switch to the other.

For example, you can swap from a five-year deal to a three-year deal or vice versa. However, these savers can’t move their money into the two-year deal. Only those in the two-year certificates can invest their money for another two-year term — or pick three or five years. Each certificate gives you inflation, plus a tiny extra 0.01 pc. Their big advantage is they are linked to the retail prices index (RPI), not the government-favoured yardstick, the consumer prices index (CPI). This means savers are earning 2.51pc — more than with any account offered by banks or building societies. NS&I has no plans to put these certificates back on general sale. So while new savers are denied an inflationproof home, those already on board should look to stick with them. The same is true for NS&I guaranteed growth bonds. They pay 1.2 pc for one year and 1.3 pc for two — far higher than the average 0.64pc and 0.81pc on sale from banks and building societies. For three years, you get 1.5 pc and 2.3pc if you tie up cash for five.