My NS&I 6.2% one-year bond is ending – where should I put my money now?

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I took out NS&I’s fixed rate Guaranteed Growth Bond paying 6.2 per cent almost a year ago and it is about to mature.

I put £30,000 into it, as it was a top rate at the time, and would like to reinvest the money into another fixed rate savings account now.

I realise rates have fallen, but what are the best deals that I can get? Should I try to use a cash Isa for some of the money, as I haven’t paid anything into an Isa yet this year?

Helen Kirrane of This is Money replies: When NS&I launched its blockbuster one-year Guaranteed Growth and Income Bonds paying 6.2 per cent in September last year they blew the competition out of the water. 

No other provider was able to offer a rate close to it. 

The result was that 225,000 eager savers like you rushed to pile £10billion of savings into the bonds. 

NS&I withdrew the best-selling bonds six weeks after they were launched, which means the last of these account are set to mature on Sunday 6 October

At a rate of 6.2 per cent over a year, your £30,000 investment will have earned a handsome £1,913.78, according to This is Money’s savings calculator – not to be sniffed at. 

You said you want to re-invest your money into a one-year fixed rate bond. These have now fallen some way from the highs of August 2023 but still offer more than they have in the past. 

The best one-year bond on This is Money’s independent savings tables now pays 4.95 per cent. It is offered by Union Bank of India. 

If you were to re-invest your £31,913.78 in this account, after a year it would earn £1,616.07 interest and be worth £33,529.85. 

Other top one-year bonds come from Access Bank, which is paying 4.8 per cent, and Smartsave Bank, which offers 4.78 per cent. 

Opening an account with a savings platform can lead to yet better rates than opening an account directly with a savings provider. 

Platform Prosper* is currently offering boosted savings rates. At the moment the best one-year fix at Prosper* is from Al Rayan Bank at 5.05 per cent*. 

If you were to reinvest your savings in this account they would earn £1,649.48 interest after a year and be worth £33,563.26. 

The underlying rate on this account is 4.8 per cent, and a boost of 0.25 per cent will be paid when the account matures.  

A word of caution on all this though – as you pointed out, you have not used any of your Isa allowance for this year and I would urge you to do this before piling all your money into a new one-year bond. 

The reason being you are likely going to be one of the 2.1million savers paying tax on the interest your savings has built up.

That is because of high savings rates and something called the Personal Savings Allowance (PSA), which sets out how much interest savers can earn before having to pay tax on it. 

You get £1,000 interest tax-free if you are a basic rate taxpayer, £500 interest tax-free if you are a higher rate tax payer and £0 interest tax-free if you are an additonal rate taxpayer. 

You pay tax on anything over your PSA at your normal rate of tax – 20 per cent, 40 per cent or 45 per cent. 

Your savings earned £1,913.78 in the NS&I one-year bond, so if you are a basic rate taxpayer you would have to pay 20 per cent tax on £913.78 for a tax bill of £182.75

If you are a higher rate taxpayer your tax bill would be £565.5 and if you are an additional rate taxpayer, as you have no personal savings allowance, you will pay £861.2. 

This is why using your Isa allowance is crucial, if you have the money to, as all the interest your savings earns in an Isa is completely tax free. 

For example, If you put £20,000 of your savings in the best cash Isa, which at the moment is offered by Trading 212 paying a market leading 5.1 per cent*, you would earn around £1,044.18 interest tax free. 

If you put the remaining £11,913.78 of your savings in Prosper’s one-year fix through Al Rayan at 5.05 per cent, you would earn £609.77. This is less than the £1,000 PSA so you would not pay tax on this if you are a basic rate taxpayer. 

If you are a higher rate taxpayer you would pay 40 per cent on the amount over £500 for a (much reduced) tax bill of £43.9. 

Another benefit of Trading 212’s cash Isa is that it is a flexible Isa, meaning that you can dip into the Isa to take money out should you need to. You can replace it without using up your Isa allowance, so long as you replace the money within the same tax year. 

This is a great benefit to those who have the financial firepower to use their full Isa allowance. 

> See This is Money’s five best cash Isas here