New issues of the NS&I one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds are on sale from today at 6.20% gross/AER and 6.03% gross/6.20% AER respectively. The last issue of both bonds paid 5% AER.

These are the highest ever interest rates for both bonds which first went on sale in 2008. They’re now the most competitive one-year fixed rate savings accounts on the market.

Guaranteed Growth Bonds are a lump sum investment that earns a fixed rate of interest over a set period of time. The bonds are designed to be held for the full term. Interest is calculated daily and is added to the bond on each anniversary of the investment.

Guaranteed Income Bonds are a lump sum investment that pays out monthly income at a fixed rate of interest over a set period of time. Interest is calculated daily and is paid into the customer’s nominated bank account.

Savers will need a minimum investment of £500 to invest in either bond, and can invest up to a maximum of £1m in each issue. After one year, savers will have the choice to withdraw their cash or reinvest.

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NS&I is also upping the interest rates for existing customers with two, three and five-year bonds when their current holding reaches maturity. These bonds now pay up to 5.80%.

‘NS&I has gone all in’

Dax Harkins, NS&I chief executive, said: “It was great to be able to bring back on sale our one-year fixed rate Guaranteed Growth Bonds and Guaranteed Income Bonds in February last year. Today, we are able to offer new issues with an improved interest rate for customers wanting the certainty of knowing how much they will be earning on their savings for one year.

“At the same time, existing customers with maturing bonds can choose to invest at new higher rates for two, three and five-year Guaranteed Growth Bonds and Guaranteed Income Bonds.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “NS&I has gone all in with the rates on these one-year bonds, and savers are likely to snap them up. For the vast majority of the time, it applies the time-honoured rule that it wants to offer something in the middle of the pack, so it attracts enough cash, but without paying over-the-odds for it, so landing a rate at the top of the pile is quite a departure.

“It reflects the fact the organisation has a fairly punchy net financing target of £7.5bn in this financial year, at a time when people’s finances are under so much pressure that they’re spending their savings to make ends meet.”

Related: NS&I boosts Green Savings Bonds interest rate to 5.70%