NS&I pulls one-year Guaranteed Growth & Income Bonds: best alternatives

The accounts have been pulled after just 37 days as savers rushed to grab the best buy rate, but the move doesn’t necessarily mean the savings market has peaked.

Savers have been dealt a blow after National Savings & Investments abruptly pulled two of its best buy savings bonds from the market.

The NS&I Guaranteed Growth and Guaranteed Income bonds have proved hugely popular since their launch on 30 August offering a rate of 6.2% over a one-year period.

That best buy rate, coupled with the additional security of saving with a state-backed institution, convinced a whopping 225,000 savers to deposit funds between launch and 5 October.

Given that NS&I has an annual funding target to meet, it has decided to pull the products from the market with immediate effect to avoid overshooting the mark as more savings rolled in.

Manage all your savings accounts in one place with Raisin, the simple savings service

Best Guaranteed Growth & Income Bond alternatives

The withdrawal is undoubtedly a blow to anyone who hadn't yet got around to applying for the NS&I bonds as they were undoubtedly table-topping.

However, there is some respite in the fact that the next best equivalent accounts aren’t far off them.

When the NS&I bonds first launched, the best alternatives on the market paid 6%.

However, both Oxbury Bank and SmartSave currently offer one-year fixed-rate bonds with a rate of 6.11%.

Assuming you had £10,000 to stow away, that would mean missing out on just £9 worth of interest over the term compared to the NS&I Guaranteed bonds.

Don’t assume the savings market has peaked

Savings rates have risen constantly over the last 18 months as the Bank of England kept repeating its party trick of repeatedly hiking Base Rate to try and get a handle on rampant inflation.

With CPI steadily declining and the Bank of England surprisingly voting to hold Base Rate rather than roll out another hike at the last rate-setting meeting, some might see the pulling of the headline best buy savings rate as a sign that savings rates have now peaked.

While we have no way of knowing exactly what will happen next, there are two reasons to be sceptical of that view.

First, some analysts believe Base Rate could still rise from its current 5.25% to 5.75% by next Spring before falling back.

That means savings rates – certainly on shorter-term fixes – could rise further still in the coming weeks.

Second, it’s important to note that NS&I doesn’t operate in the same manner as traditional savings institutions, given its Government backing and annual funding target.

Its bonds were pulled not necessarily because it feels that rate is too generous given the current market outlook, but rather that it wanted to reduce in-flows from savers.

We shouldn’t rule out the possibility that rates could trickle back up to – and maybe even beyond – NS&I’s 6.2% rate in the weeks ahead.

And if you are of the mindset that rates have peaked already, by acting now to lock into a rate of up to 6.11% you can ensure that you still locked in fairly close to the top of the market.

Manage all your savings accounts in one place with Raisin, the simple savings service