Movements in the market rates for government bonds has prompted National Savings and Investments (NS&I) to change its interest rates for its savings certificates.
Rates for fixed interest savings certificates will increase as returns on the related gilts have risen, while index-linked savings' interest rates will be reduced due to the related gilts' returns falling sharply.
Index-linked savings are three or five-year certificates that earn a set interest rate in addition to a return linked directly to the fluctuating Retail Prices Index (RPI), which currently stands at 2.4 per cent, ensuring interest always exceeds inflation.
Both index-linked and fixed interest savings certificates are exempt from taxation and the current rate for fixed interest savings is 3.05 per cent AER.
This is the first change of NS&I interest rates since December 2005 and will allow investors to endow a further £60,000 in total and earn tax-free interest on the government-secured bonds.
John Prout, sales director at NS&I, said: "We always aim to provide consistent and fair rates and, despite many fluctuations in the gilt market over the past three months, this is our first rate change since December last year."
"Whenever there are improvements in the market, we always aim to pass these benefits on to our customers," he added.
The bonds offered by NS&I are unique in the UK for the fact they are secured by HM Treasury, and therefore provide the added security from potential bankruptcy that savings with private companies do not.To read more on savings and investment, click here.
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