Thousands of savers are being urged to check whether they have money sitting in a “legacy” savings account that pays just one per cent interest, and to switch to a better deal if they do.
National Savings & Investments (NS&I) offers a range of savings products backed by the UK government, including ISAs, regular savings accounts and premium bonds.
The organisation has more than 26 million customers and is widely considered to be one of the safest places to put your money.
But it also offers a legacy Investment Account that pays a paltry 1 per cent interest rate – considerably below inflation, which currently 3 per cent, and well below the top savings rates on the market.
The account requires a minimum deposit of £20 and allows up to £1m, with no penalties for withdrawals. However, it is a taxable savings account, meaning you could potentially owe tax on your returns.
Despite this low rate of return and the fact it is not tax-free like premium bonds, the account took in £127m in deposits in the last financial year, and there were still £1.6bn in these accounts as of the end of 2024/25.
Steve Webb, partner at pension consultants LCP, said the account offered poor value for money for savers and NS&I should be switching savers into products offering a better rate.
“If a private-sector firm offered something called an “investment account” which paid rock-bottom interest rates and meant savers were losing money in real terms every year, there would be questions asked about whether they were satisfying the FCA’s Consumer Duty requirements,” he said.
“So, it seems quite wrong for a taxpayer-funded organisation to be doing the same.
“NS&I offer other products with similar product features but much better interest rates, and the investment account is clearly a legacy product which is simply being allowed to die slowly.
“It needs to find a way to migrate customers to something better as a matter of urgency, and it certainly should not be accepting new deposits into this poor value product.”
The Financial Conduct Authority sets out a Consumer Duty, which requires financial firms to deliver good outcomes for their customers – but this does not apply to government-backed organisations.
An NS&I spokesperson said: “We do not promote the investment account to new customers as we have a number of alternative accounts, such as direct saver and income bonds, that pay a higher rate of interest and can be managed by post if required, which customers can choose as an alternative.
“For existing investment account customers, we include details of other NS&I products which they may find more suitable in their annual postal statements.”
How to get a better deal on your savings
While keeping your savings with a trusted provider may seem tempting, you could potentially earn yourself hundreds or even thousands of pounds long-term by moving to a product paying a higher interest rate.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Many savers flock to NS&I as they are backed by the government. Many do not want to risk their hard-earned cash and feel more comfortable staying with a well-known brand.
“There is also an argument that, due to years of low interest rates and high inflation, consumers may feel it’s not worth moving their money into a savings account. But that’s not true.
“Challenger banks and building societies offer some of the best returns on the savings market, and yet, many keep their pots with a high street bank or even in a current account that earns little to no interest.”
Springall highlighted that switching doesn’t take much effort, and “it’s important to get into the habit of earning a rate that can outpace the eroding effect of inflation.
“The top savings deals pay more than 4 per cent right now, but some of the biggest high-street banks pay just 1 per cent on their most flexible savings accounts, so shopping around is wise.”
For example, Lloyds Bank pays just 1 per cent on its flexible saver account, while Virgin Money offers more than 4 per cent for its easy-access saver.
Fixed accounts typically pay higher interest rates than easy-access ones, but remember this will require you to lock your money away for a fixed period, so you won’t be able to withdraw it in an emergency.
To switch savings accounts, first research and compare different savings accounts to find one that offers a better interest rate or features that suit your needs. You can use comparison sites such as Moneyfacts, Confused.com or Compare The Market to weigh up competing rates.
Once you’ve chosen a new account, you will need to complete an application, which usually involves providing personal details and ID. When the account is open, you can withdraw your money from your old account and deposit it into the new one.
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If you are opening an ISA, however, make sure to switch the money directly from your old ISA to the new product, as withdrawing the money and depositing it again could affect your ISA allowance for the year.
You may not be able to move money out of a fixed-term savings product until the end of the fixed period.
Nicola Morgan, consumer finance expert at Confused.com, said: “Even a small difference in rate can make a material impact over time, particularly on larger balances. A higher rate could mean hundreds of pounds more in interest, simply by switching to a better deal.
“Taking a few minutes to review your account and compare it against the best rates on the market can help ensure you’re not missing out and that your savings are delivering the strongest return possible.”
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