NS&I has boosted the rates of its British Savings Bonds to up to 4.1% AER and has relaunched one and five year fixed-rate bonds.

British Savings Bonds are fixed-term Issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.

It will be the first time in more than 15 years that savers can buy four different fixed-rate income or growth bonds from NS&I. The last time all four term lengths of 1, 2, 3 and 5-year Bonds were on sale at the same time was 16 February 2010.

Andrew Westhead, NS&I retail director, said: "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." 

Laura Suter, director of personal finance at AJ Bell, said: “The rates are lower than the market leaders, meaning savers are sacrificing returns for the safety and brand recognition of NS&I. For example, the current market leading one-year fixed rate accounts pay around 4.65%, while the NS&I version pays 4.05%. For someone saving £25,000 that equates to £150 of lost interest over the year – not an insignificant sum.”

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “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.”

She said the 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.

Ms Suter said: “Despite the lower interest rates, the bonds are likely to be hugely popular, particularly the one-year offering. When the one-year version of these bonds went on sale in late 2023 they sold out in five weeks, with more than a quarter of a million savers putting more than £10bn in the accounts. At the time the accounts paid 6.2%, so the lower rate might mean we don’t see such a clamour for the accounts.”

Guaranteed Growth Bonds and Guaranteed Income Bonds are available to customers wanting a guaranteed rate for a fixed-term of 1, 2, 3 or 5 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 Funds cannot be withdrawn early with fixed-term accounts.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.