NS&I cuts rates on Bonds in January blow to savers | Personal Finance | Finance
Savers have been dealt a setback as NS&I has introduced new issues of its British Savings Bonds with reduced interest rates. The Treasury-backed provider stated the decision reflects “changes in the wider market“.
In December, the Bank of England base rate was reduced from 4% to 3.75%, benefiting some mortgage holders but disappointing savers. NS&I is assigned annual net financing targets, and funds invested with it contribute towards government expenditure.
It also has an obligation to balance the interests of savers, taxpayers and financial services. The provider explained the rate adjustments will assist it in meeting its net financing target whilst continuing to balance the interests of savers, taxpayers and the wider financial services sector.
British Savings Bonds are fixed-term products from NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds range. They are accessible to individuals seeking a guaranteed rate for a fixed period of one, two, three or five years.
Money cannot be accessed early with fixed-term accounts. Savers require a minimum investment of £500 and can invest a maximum of £1 million per person in each issue.
New reduced rates for NS&I British Savings Bonds
One-year versions of the bonds, which had previously been available with a rate of 4.20% AER (annual equivalent rate), will now be offered at 4.07% AER. Two-year products, which had been available at 4.10% AER, are now being offered at 3.98% AER.
Three-year versions, previously available at 4.16% AER, are now being offered at a rate of 4.02% AER. Five-year versions, which were formerly offered at a rate of 4.15% AER, will now be available at 4.05% AER.
These bonds are open to new customers, as well as those with existing bonds nearing maturity. NS&I has stated that existing British Savings Bonds customers who have already received their 30-day maturity letter will receive the interest rate quoted in the letter.
In November, NS&I had raised rates on British Savings Bonds, going against trends observed elsewhere in the savings market. NSandI provides a variety of savings and investment options to over 24 million customers.
All products offer 100% capital security due to the provider’s backing by the Treasury.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “If you blinked, you’ll have missed higher NS&I bond rates, because just two months after they were boosted, they’ve been trimmed back again. This isn’t a surprise.
“The autumn and winter tend to see more fixed-rate accounts mature, so there’s always a risk that savers will take their money and leave. That was definitely a theme in September, when money was flowing out of NS&I. There’s every chance that this temporary boost was designed to stem the flow.
“There was actually a significant rise in savings in November, when £2.45 billion was paid into NS&I, so now those higher fixed rates have done the job, cuts were in order. The good news is that the bonds are still offering more than they did before the November bump.
“However, the bad news is that they fall short of the most competitive deals in the market. The fixed rate market has held up impressively in the face of the Bank of England rate cuts – in part because the market isn’t expecting interest rate cuts to be particularly thick on the ground in 2026.
“You can still get 4.45 per cent on a one-year bond, 4.16 per cent over two years, 4.21 per cent over three years and 4.31 per cent over five years. It means you can get a better deal from some of the online banks and savings platforms, so it’s important to check what’s on offer before you tie your money up.”
