National Savings & Investments is pulling out all the stops to woo savers.

Last month it announced the Premium Bond prize rate will rise for next week’s draw, bringing an extra £60million to the prize table.

Then yesterday it went further with an impressive rate hike that propelled its bonds to the top end of the fixed rate savings best buy tables.

With rates as high as 4.69 per cent for a year they are among the best and will be snapped up by savers.

And while NS&I doesn't have the absolute top rate, it has a crucial advantage over rivals thanks to its protection status. 

NS&I needed to pull up its socks in this competitive savings market because it wants our money.

It has to bring in a near record £15billion extra (with leeway of £4billion each side) for the Government this financial year, which started in April.

Early signs were not encouraging. In the first month it lost £192million. 

That’s partly because savers were not impressed by the cut in the Premium Bond prize draw fund from 3.6 per cent to 3.3 per cent in April.

It was quickly reversed with the prize fund rising to 3.8 per cent in next week’s draw, along with better odds of winning.

The Government-backed savings arm’s position wasn’t helped by the fiasco in March when it revealed it had mislaid some £367million in 34,000 bereavement claims. 

So up went the rates on its Guaranteed Growth Bond and Guaranteed Income Bonds, which offer a fixed rate of interest for one to five years.

The one-year Guaranteed Growth Bond pays 4.69 per cent. This is comfortably above the 2.8 per cent inflation rate. 

A few newer banks pay slightly more – between 4.7 per cent and 4.85 per cent if you tie up your money for a year, with the top rate from MBNA Bank.

But the advantage with NS&I is that all your money is covered by the government. With banks and building societies you are limited to £120,000 or £240,000 on joint accounts.

NS&I’s new rate on its one‑year bond is substantially above the big banks which pay as little as 3.7 per cent, with the best of the bunch 4.3 per cent at Halifax and Lloyds. Coventry BS is the best high street contender at 4.63 per cent.

The one-year Guaranteed Income Bond, where interest is paid out monthly rather than just once a year, at 4.6 per cent is a near winner.

But be wary of the Guaranteed Growth Bonds which run longer than a year. NS&I lumps all the interest together and pays it out in one go at the end. 

So it is all taxed in that final year – rather than spread out over multiple years – and increases the risk that you breach your personal savings allowance.