NS&I interest rate rise 'a sign of the times'

21 May 2009 / by Rebecca Sargent
National Savings and Investments (NS&I) have announced an increased interest rate on its income bond investment products.

The rate on NS&I's income bonds has increase by one per cent, and those investing between £500 and £24,999 will receive a rate of 1.7 per cent, while those with more than £25,000 to invest will get two per cent.

The increase is, according to experts at investment house T. Bailey, "a sign of the times," as interest rates on mortgages are starting to bottom out, signalling an increase in saving returns.

However, Philippa Gee, head of marketing and communications at T. Bailey, warns against investing large amounts into the NS&I income bonds: "I would advise caution against reacting to this announcement by investing significant amounts in this plan, despite the security, accessibility and reputation NS&I commands. There is need to be cleverer in choosing investments for income," she said.

In fact, according to Ms Gee, in the current climate of high taxes, it makes more sense to pursue an investment for growth portfolio, "using regular encashment facilities to meet income requirements."

"The key is to remember that just because an investment product doesn't have the word 'income' in its name; it does not preclude it from being used to cover expenditure. Always seek Independent Financial Advice for help with this process," she added.

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