National Savings & Investments (NS&I) has introduced a significant rate increase on its savings products in an effort to attract more deposits amid a competitive market. The government-backed savings provider now offers a one-year Guaranteed Growth Bond with an interest rate of 4.69%, positioning it among the highest rates available to retail savers.

This move follows last month’s announcement that the Premium Bond prize fund would increase, adding an additional £60 million to the prize pool in the upcoming draw. The latest rate adjustment aims to boost NS&I’s inflows, which have been under pressure since the start of the current financial year in April. The organization is targeting net additions of approximately £15 billion, with some flexibility, to help meet government borrowing requirements.

Initial figures were less favorable, as NS&I reported a £192 million net outflow in April. This was partly attributed to a cut in the Premium Bond prize fund rate from 3.6% to 3.3% in April, a reduction that was later reversed with a rise to 3.8% scheduled for the next draw alongside improved odds of winning.

NS&I’s efforts to strengthen its position come in the wake of issues earlier this year when the agency admitted to misplacing around £367 million related to approximately 34,000 bereavement claims. This controversy underscored the urgency for NS&I to regain public confidence and improve its attractiveness in the savings market.

Compared to other providers, NS&I’s new rates on its one-year Guaranteed Growth Bond stand out. While a limited number of newer banks offer rates in the range of 4.7% to 4.85% for comparable terms—with MBNA Bank at the top—most major high street banks provide significantly lower returns. For example, Halifax and Lloyds offer around 4.3%, with Coventry Building Society leading among traditional lenders at 4.63%. NS&I’s advantage lies in its government guarantee, which covers all investments without the typical £120,000 deposit insurance limit applied by banks and building societies.

Additionally, NS&I’s one-year Guaranteed Income Bond, which pays interest monthly rather than at maturity, now offers 4.6%, appealing to those seeking regular income.

Prospective investors should note, however, that NS&I’s longer-term Guaranteed Growth Bonds consolidate interest payments and pay them as a lump sum at maturity. This structure may result in higher tax liabilities in the final year if the accumulated interest pushes savers above personal savings allowance thresholds.

Overall, NS&I’s recent rate enhancements and improvements in prize funds reflect a strategic response to recapture market share and meet substantial funding targets amid ongoing competition and operational challenges.