Alliance Leicester has raised the savings interest rate on its Fixed Rate Savings Account, available when savers take a Legal and General savings bond.

The savings account, which is only open to customers of their Balanced Saving and Investment Plan, now offers an interest rate of seven per cent gross. The savings account has a minimum investment of £1,000 and a fixed term of one year.

The investment plan incorporates both the savings account and the Legal and General Investment Bond , which requires a minimum investment £5,000 over five years or more.

Those taking out a savings bond can choose a wide range of funds to invest in, but must invest more in the savings bond than in the savings account.

Sarah Ennion, investments product manager at Alliance Leicester said: Research we carried out earlier this year showed that both saving and investment levels in the UK are set to increase. It showed that people are planning to increase the amount they save to nearly double the amount they did a year ago and investment confidence is also increasing.

Because the need for a safe haven for short-term savings is balanced with the opportunity to invest over the longer term for potentially high returns, making this a better deal than a typical deposit account , Ms Ennion concluded.