NS&I boosts interest rates on 8 fixed-rate savings accounts – are they any good?

NS&I has hiked interest rates on its fixed-rate savings products for the third consecutive time this year, making them some of the best on the market.

The government-backed bank has increased the interest rates on new issues of its one, two, three, and five-year savings accounts, called British Savings Bonds.

It brings NS&I’s top interest rate to 4.75% for the new five-year guaranteed growth bond, or 4.72% for the new one-year guaranteed growth bond.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Andrew Westhead, retail director at NS&I, said: “Today’s increases mean savers can now choose from improved fixed-term rates across our one, two, three and five-year British Savings Bonds, with the certainty of knowing exactly what return they will receive over their chosen term.”

What are the new rates?

NS&I has increased rates on eight of its fixed-rate accounts, but the size of the hike differs depending on the term and type of each account.

There are two types of British Savings Bonds – guaranteed income and guaranteed growth bonds.

Guaranteed growth bonds are lump sum investments that earn a fixed rate of interest over a set period of time and are designed to be held for the full term.

Meanwhile, guaranteed income bonds pay out monthly income at a fixed rate of interest over a set period of time based on the size of your lump sum investment.

The table below shows the new and old rates for each savings account.

Source: NS&I, 31 July

Are NS&I British Savings Bonds any good?

With increased rates, new issues of NS&I’s British Savings Bonds are a lot more attractive for savers looking for high rates.

However, the accounts do not provide the absolutely highest interest rates available on the market.

NS&I’s one year fixed rate growth bond pays 4.72% interest. This is well above the market average of 4.27%, according to Moneyfacts, but still lower than the top one-year fixed rate saver from GB Bank that pays 4.92%.

Even with the new increased interest rates, you can currently find alternative accounts with stronger interest rates across all term lengths.

The table below compares the interest rate on the top fixed-term account on the market to the interest rate offered for the same term by NS&I.

Source: Moneyfacts, NS&I, 31 July

Caitlyn Eastell, personal finance analyst at Moneyfacts, said: “NS&I’s decision to increase rates on its British Savings Bonds is a welcome boost for savers and makes them a far more competitive option in the current fixed-rate savings market.”

She added: “While the market-leading fixed bonds are now paying 5%, some savers may be willing to sacrifice the extra interest for the peace of mind NS&I offers, especially those with large deposits.

“Unlike traditional savings accounts, every pound held with NS&I is backed by HM Treasury, giving savers an unlimited government guarantee rather than the £120,000 FSCS protection available with banks and building societies.”