Rate rises leave young and old quids in

Rate rises leave young and old quids in

It means children's bonus bonds now pay 5.1% (those on sale 18 months ago were paying only 3.65%), while pensioners guaranteed income bonds offer up to 5.35%.

The rates are going up even though the Bank of England base rate was left unchanged earlier this month. That is because NS&I's fixed rates tend to be tied into "gilt yields" - the returns from government bonds. In the past, National Savings has been criticised for slashing interest paid on these sorts of products on the back of falls in gilt yields. But with returns on gilts now climbing, the government's savings bank has been able to announce some decent rate rises.

· If you want to save for a child, and do not want to take risks, children's bonus bonds are well worth considering. These are five-year fixed rate products that can be bought by anyone over 16 for a child under 16. You can deposit between £25 and £3,000 in each issue, and all returns are tax-free for both child and parent. The latest issue (24th) pays 5.1% a year, up 0.3% on the previous issue.

· The one-year, two-year and five-year pensioners guaranteed income bonds (series 35, 41 and 49) now pay 5.3%, 5.35% and 5.2% before tax respectively. These bonds are available.....continued below

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· The maximum rate paid on the latest issue of National Savings' three-year fixed rate savings bond has risen to 5.6% (up from 5.25%) on balances of £50,000 or more, and to 5.25% (up from 4.9%) from £500-plus. Its one-year fixed rate savings bond will now pay a maximum rate of 5.55% on £50,000-plus. With these, you can go for growth or income. If you opt for growth, your interest is reinvested. If you choose income, you can receive interest annually or monthly.

· The rates on the two and five-year fixed interest savings certificates, which offer a guaranteed tax-free return, have increased to 3.95% and 3.85% respectively, with a maximum deposit of £15,000 per issue. The rate is equivalent of 6.58% or 6.42% gross for higher-rate taxpayers.

National Savings (nsandi.com), which has used businessman Sir Alan Sugar, star of The Apprentice, in its TV adverts, last upped some of its rates on May 23.

This week also saw Birmingham Midshires launch a new one-year fixed rate bond paying an attractive 6.4% gross. Midshires says the bond is "unique to the marketplace in offering an excellent rate of interest for a minimum balance of £1, and it is one of the best buys available". However, it is beaten by parent company Halifax, whose one-year Web Saver fixed rate bond now pays 6.5% on a minimum investment of £500, and Anglo Irish Bank, which has a one-year bond paying 6.45% (again, the minimum deposit is £500).