National Savings and Investment (NS&I) has increased the interest rates offered on its British Savings Bonds as it launched new issues today.
The products pay between 4% and 4.1% across four different term lengths and, for the first time in fifteen years, all four are now available for purchase.
The interest rate hike will be welcome news for savers who prefer to use NS&I’s products, as NS&I slashed the rates in December 2024.
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There are two options for British Savings Bonds – Guaranteed Growth Bonds and Guaranteed Income Bonds.
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To get started, savers will need to deposit a minimum of £500, while the maximum amount is £1 million per person in each issue.
Guaranteed Growth Bonds are a lump sum investment that earn a fixed rate of interest over the chosen term length. They are designed to be held for the full term and interest is calculated daily, then added to the bond once a year.
Meanwhile, Guaranteed Income Bonds are designed to pay out a monthly rate of interest to the bondholder’s bank account over the chosen term length.
Andrew Westhead, NS&I retail director said he was “pleased” the one-year and five-year British Savings Bonds were back on sale today.
He added: "In today's changing market, I'm glad we can offer savers who are looking for guaranteed rates greater choice, safe in the knowledge that their savings are 100% protected.
“Today’s changes will help us to meet our new Net Financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector."
What are the new interest rates on British Savings Bonds?
New issues of the one-year Guaranteed Growth Bonds and Guaranteed Income Bonds provide an interest rate of 4.05% (up from 3.95%).
Issues of two-year growth and income bonds are slightly lower, paying interest of 4% (up from 3.6%).
The new three-year growth and income bonds pay the highest interest rate out of NS&I's range, paying 4.1% AER (up from 3.5% and 3.49% respectively).
Finally, for savers who are willing to lock their money away to grow for half a decade, the new issues of five-year growth and income bonds now pay an interest rate of 4.06% (up from 3.4% on growth, and 3.39% on income).
Despite the increased interest rates, savers could find higher rates elsewhere – see our “best savings rates” guide for the latest options.
Laura Suter, director of personal finance at AJ Bell, warned the rates are lower than the market leaders, which means “savers are sacrificing returns for the safety and brand recognition of NS&I”.
The current top one-year fixed rate account pays around 4.65%, while NS&I pays 4.05%. “For someone saving £25,000 that equates to £150 of lost interest over the year – not an insignificant sum,” Suter said.
What are British Savings Bonds?
NS&I’s British Savings Bonds let customers grow their cash savings while also helping raise money for the government to invest in the UK.
As NS&I is an arm of the UK government, savings products bought with them afford much greater security than most other financial services firms.
This is because every single penny you save with NS&I is 100% backed by HM Treasury, which is higher than the £85,000 limit on FSCS-protected savings products.
What is the difference between British Savings Bonds and Premium Bonds?
NS&I is perhaps most famous for being the provider of Premium Bonds, a hugely popular tax-free savings product.
Premium Bonds differ from British Savings Bonds in the way that they do not pay a specified interest rate. Instead, Premium Bonds holdings are entered into a monthly prize draw, where savers are in with the chance of winning between £25 and £1 million.
In the April Premium Bonds prize draw, more than 5.9 million prizes worth over £412 million were awarded.
Conversely, British Savings Bonds are more traditional savings vehicles, as they pay out a guaranteed monthly interest rate.
As all of their products are 100% backed by the UK government, money kept with NS&I is safe for as long as the government is in existence.
