British Savings Bonds are fixed-term issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.
What are the new rates?
- The new interest rate on the one-year growth option is 4.05% gross/AER, and the income option is 3.98% gross/4.05% AER.
- The new interest rate on the two-year growth option is 4% gross/AER, and the income option is 3.93% gross/4% AER.
- The new interest rate on the three-year growth option is 4.1% gross/AER, and the income option is 4.03% gross/4.1% AER.
- The new interest rate on the five-year growth option is 4.06% gross/AER, and the income option is 3.99% gross/4.06% AER.
All four term lengths of one, two, three and five years have not been on sale at the same time since 2010.
Andrew Westhead, NS&I’s retail director, said: “I’m pleased to announce the return of our one-year and five-year British Savings Bonds from today, alongside increased interest rates for our existing two-year and three-year fixed-term options.
“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.”
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What are British Savings Bonds?
Guaranteed Growth Bonds and Guaranteed Income Bonds are available to customers wanting a guaranteed rate for a fixed term of one, two, three or five years. Funds cannot be withdrawn early with fixed-term accounts.
Savers will need a minimum investment of £500 and can invest a maximum of £1m per person in each issue. After the fixed-term period, savers will have the choice to withdraw their cash or reinvest into a new term.
Better rates available elsewhere
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “For die-hard NS&I devotees, this brings some choice to a marginally improved range of fixed rate accounts, so people can fix their savings for the periods that make the most sense for their circumstances. However, that’s just about all you can say in favour of these deals, because you can do far better elsewhere.
“It’s bucking the trend by announcing rises in a market that is holding on impressively to decent rates, but is still very gradually trending downwards. However, it’s a small bump that does little to close the gap between these rates and the most competitive ones around.”
The biggest gap between the NS&I rate and the best deal on the market at the moment is with the one-year offering, where NS&I offers 4.05% and the most competitive in the wider market is currently 4.65% from Cynergy Bank.
The gaps for the rest of the range are also significant, given you can make 4.58% over two years (with Close Brothers), 4.55% over three years (Birmingham Bank, Close Brothers, Cynergy Bank and Secure Trust Bank) and 4.58% over five years (Secure Trust Bank). NS&I offers 4%, 4.1% and 4.06% over two, three and five years respectively.
Coles added: “NS&I has to offer middle-of-the-road deals to avoid taxpayers forking out too much for savings or skewing the market. The rates have been bumped up slightly in order to meet a marginally higher funding target, but remain nothing to write home about.
“These accounts will continue to appeal to savers with huge amounts on deposit, because they can put up to £1m into fixed rate bonds and it’s all 100% guaranteed by the Government. It means they don’t have to spread their money between a number of savings accounts in order to benefit from multiple FSCS savings limits, and can keep an eye on it all in one place.”
