New issues of NS&I’s British Savings Bonds now on sale: How do they fare?

The Government-backed brand is also poised to lower the rate paid by its Junior ISA.

Government-backed brand, National Savings & Investments (NS&I), released new issues of its British Savings Bonds today, however, some customers may be disappointed by the lower rates.

Having previously paid 4.00% AER, its two-year Guaranteed Growth and Income Bonds now offer savers a fixed rate of 3.85% AER on a £500 minimum deposit. Meanwhile, its three- and five-year counterparts pay 3.88% AER and 3.84% AER, respectively – down from 4.10% AER and 4.06% AER.

^{Source: National Savings & Investments}

“Today’s announcement is in response to changes in the wider market and will ensure we continue to offer a range of fixed term options while balancing the interest of savers, taxpayers and the broader financial services,” said Andrew Westhead, Retail Director at NS&I.

Indeed, many banks and building societies similarly reduced rates over recent months – largely in response to the Bank of England lowering the UK’s central interest rate.

“NS&I traditionally would react to any interest rate moves within the wider markets to ensure they are not sitting head and shoulders above the competition,” explained Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

With this in mind, she urged savers to keep a close eye on their accounts.

How competitive are NS&I’s British Savings Bonds?

While the new issues of NS&I’s British Savings Bonds continue to outpace the rate of inflation, it should be noted more competitive returns remain available.

Two-year fixed rate bonds from Cynergy Bank, GB Bank and Vanquis Bank, for instance, currently offer the market-leading rate of 4.43% AER. Savers depositing £10,000 into such an account could earn over £100 more in interest compared with the two-year Guaranteed Growth and Income Bonds from NS&I.

GB Bank also leads our three-year fixed rate bond chart, with its 3 Year Fixed Rate Bond paying 4.42% AER. As for the best five-year fixed savings rate, this can be found from Birmingham Bank with its 5 Year Fixed Rate Bond – Issue 22 priced at 4.47% AER.

Nevertheless, Springall said that, as a trusted brand providing 100% capital security, NS&I’s British Saving Bonds may appeal to “savers with big pots who are happy to forego higher interest rates available elsewhere”.

NS&I’s Junior ISA not exempt from cuts

For the first time in almost two years, NS&I is also set to change the rate paid by its Junior ISA; this account will offer 3.55% AER as of 18 July (down from 4.00% AER currently).

That being said, there are fewer products that enable children to save tax-efficiently and many in the sector only operate in branch or by post. NS&I’s Junior ISA may therefore remain an attractive option for those who prefer online banking.