Martin Lewis has sent out an "urgent savings update" to those looking to make the most out of their money due to a new bond from NS&I (National Savings & Investments).

The Treasury-backed bank increased the fixed rate on its one-year guaranteed growth bond to 6.2 per cent.

This is a very competitive rate when most savings accounts are around the 5% mark, and it has brought encouragement from the MoneySavingExpert founder.

In a tweet, Lewis posted: "Urgent savings update. Lock away money in total safety as National Savings launches a 6.2% 1yr best-buy (better than any other fix of any length) - though it likely won't last long."

How does the NS&I bond work?

The MoneySavingExpert website described the offer as a "standout fix" where you need to lock away money without access for a year.

They add: "As it's the state-owned savings institute, unlike normal accounts where your savings are protected up to £85,000 per institution, here every penny saved is backed by the Treasury, so it's as safe as it gets (unless the UK itself goes bust, in which case we've all got bigger problems)."

A minimum balance for such a bond is £500, with the maximum being £1 million per person.

You can either go for a Guaranteed Growth Bond which pays interest at maturity or a Guaranteed Income Bond which pays interest monthly, out of the account.

MSE says: "If you need the account to pay you interest as you're counting on it as income to support your lifestyle, then you need to go for the Income Bond.

Dorset Echo: The minimum balance for the account is £500The minimum balance for the account is £500 (Image: PA)

"If you don't need an income, then there's a choice to be made. If you go for the Growth Bond, the interest will all count towards your tax-free allowance for the next tax year, not this.

"It may mean that you bust your personal savings allowance (PSA) for the 2024/25 tax year.

"Taking monthly interest could help prevent this as you're able to spread the interest over this tax year and the next – though here you won’t get interest on the interest, so there's a trade off."

How long will the NS&I bond be available for?

The MoneySavingExpert website reckons this good of a deal won't be around for too long if enough people start taking it up.

They said: "NS&I doesn't work like other savings institutions. It has rules that mean it can't overly distort competition, so you wouldn't expect it to be at the top of the tables for a long time.

"Though NS&I is currently tasked with raising £7.5 billion for the Treasury this tax year - a relatively high figure. But if these accounts prove popular (and them being in this email will help that) then they may not be around long. So sooner is surer."