NS&I raked in £7.7BILLION of saver cash in September fuelled by its best ever one-year fix of 6.2%
- Savers deposited £7.7 billion into NS&I accounts in September
- NS&I’s 6.2% one-year fixed-rate bonds were largely responsible for this
- The launch of the bonds by NS&I ‘hurt the rest of the savings market’, says an expert
According to the Bank of England’s Money and Credit report, savers rushed £7.7 billion into the nation’s savings and investment accounts in September.
This is the biggest cash inflow for the Treasury-backed bank in a single month since August 2020, when savers brought in £9.8 billion.
In early September, NS&I launched two best-buy bonds with a one-year fixed rate: guaranteed growth bonds and guaranteed income bonds, which paid an interest of 6.2 percent.
Experts say interest on these accounts was ‘undoubtedly’ the main reason behind the sharp increase in cash flows into NS&I.
Savings rush: Savers rushed to deposit £7.7 billion into NS&I accounts before the Treasury-backed bank withdrew its 6.2% one-year fixed rate bonds
The Guaranteed Growth Bonds dominated the best buy tables for the entire five weeks they were on offer, as no other savings provider managed to beat NS&I’s stellar rates.
The bonds were withdrawn on October 6 due to soaring demand and NS&I reported that 225,000 customers had signed up for these products.
James Blower, founder of the Savings Guru website, said: ‘Given that we know from their reports that there have been outflows on some other products, it is entirely possible that they have taken in more than the £7.7 billion and that this has compensated for the outflow from other products.’
He added: “Using the challenger banks’ average fixed rate deposits of around £40,000, this would indicate that NS&I received around £9 billion on the one-year deal.
‘The alternative is that they saw a lower average balance, say £30,000, and the rest came from small inflows into Premium Bonds and other products.
‘My best guess is that they got just over £8bn on the one-year deal, made less than £100m on Premium Bonds and saw an outflow on other products.’
NS&I’s decision to launch the one-year bonds at this pace was met with outrage from the rest of the savings market, namely because it rarely tops the best buy rankings.
Industry body UK Finance slammed NS&I for disrupting the bond market after it withdrew the products.
NS&I is intended to raise cost-effective funding for the government – which the one-year rate of 6.2 per cent failed to do, as it was ‘well above expectations’, according to Blower.
Andrew Hagger, founder of personal finance website MoneyComms, says: ‘Around 225,000 one-year bonds were withdrawn before the 6.2 per cent interest rate was abolished, so this will be the main reason for this increase in new money.
‘NS&I does not normally operate in this way, but needed to raise money to meet government targets and therefore took this aggressive stance, which will damage the rest of the savings market because providers could not compete.’
By contrast, households withdrew £700 million from banks and building societies in September, the Bank of England report shows.
Hagger expects NS&I’s inflow figures to decline now that the 6.2 per cent deal is over, while Blower says: ‘NS&I has seen negligible inflows and we expect that trend to recover now that this product is gone.’