NS&I launches new British Savings Bonds issues with up to 4.5% interest rates | Personal Finance | Finance
Rates on savings bonds have increased (Image: Getty)
The rates on all NS&I British Savings Bonds have increased following a drop earlier this year. The new fixed-term saving bonds, which allow people to deposit a lump sum for a set period in return for guaranteed interest, have been launched today (Tuesday, April 28).
NS&I decreased interest rates in January to align with broader market trends. The reduction of base rates, which was designed to balance the interests of savers, taxpayers and the financial sector, triggered lower returns across the savings market. However, rates have now increased for all one, two, three and five-year British Saving Bonds.
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The new interest rate of a 1-year Growth option has risen from 4.07% gross/AER to 4.5% gross/AER, while the Income option has increased from 4.00% gross/4.07% AER to 4.41% gross/4.50% AER. Meanwhile, a 2-year Growth option has risen from 3.98% gross/AER to 4.48% gross/AER and the Income option has increased from 3.91% gross/3.98% AER to 4.40% gross/4.48% AER.
Likewise, the 3-year Growth option has increased from 4.02% gross/AER to 4.45% gross/AER, with the Income option rising from 3.95% gross/4.02% AER to 4.37% gross/4.45% AER. Finally, the 5-year Growth option has increased from 4.05% gross/AER to 4.40% gross/AER, and the Income option has gone up from 3.98% gross/4.05% AER to 4.32% gross/4.40% AER.
NS&I has also increased the interest rate on its Investment Account. The previous rate of 1.00% gross/AER , which has been in place since August 18, 2023, has increased to 2.05% gross/AER.
Advice has been given to Brits considering buying bonds (Image: Getty)
Sarah Coles, head of personal finance at AJ Bell, said: “NS&I is finally making more of an effort to keep up with the Joneses. These are significant rate bumps, putting the fixed rate accounts within shouting distance of the front-runners. The one-year deal is particularly strong, and given that savers are far more likely to fix for one year than any other period, NS&I is clearly working harder to attract more cash.
“It’s not a major surprise, given how rates have been rising elsewhere. NS&I has a duty to offer decent value for savers, so it couldn’t reasonably sit on its hands offering just a fraction over 4%. It has also faced its share of bad news in 2026, and with a fairly punchy funding target of £15billion this financial year, it has clearly decided that it needs to do something bold to start the year strong.”
She added: “Savers can still do better in several accounts elsewhere, so anyone hunting for the best possible deal won’t be tempted by the changes. However, for those attached to the brand or drawn by the appeal of the 100% Treasury guarantee, the rate boost may be enough to tip the balance. If you’re keen, don’t hang around in the hope that inflation fears keep pushing rates up. It’s not clear what will happen to savings rates next given the level of uncertainty around the future path of inflation.”
Advice on when to buy
Ms Coles has given advice on when to buy the new NS&I British Savings Bonds. She has warned that the bonds are not tax free so it’s important to ask yourself whether you have the tax-free allowance available for the interest.
She said: “While NS&I’s Premium Bonds are tax-free, these bonds aren’t, meaning you could pay tax on the interest you earn above your tax-free allowances, just like other cash accounts. If you’re likely to face a tax bill for the interest you might want to weigh up whether an ISA would be a better home for your savings.”
She also advises people to consider whether they need the interest now or later. The “Growth” option only allows you to access the interest at the end of the fixed term with the interest taxable in a year.
Athough the NS&I is government-backed, experts say other banks and building societies could offer a better option if they are protected by the Financial Services Compensation Scheme (FSCS). The scheme now covers £120,000 of money per person, per financial institution.
Ms Coles said: “This means that your money is theoretically as safe in any other bank with FSCS protection as it is with NS&I, although people with large amounts of savings may prefer to put their money with NS&I rather than split it into £120,000 pots with different providers.”
