NS&I boosts rates on its newly launched British Savings Bonds

NS&I joins other providers in raising returns on its fixed savings accounts.

The Government-backed National Savings & Investments (NS&I) launched new issues of its British Savings Bonds today (31 July) at higher rates, giving savers more opportunities to secure a competitive deal.

Its Guaranteed Growth Bonds (which pay interest on anniversary) and its Guaranteed Income Bonds (which pay interest monthly) now offer improved returns of up to 4.75% AER.

Although savers will need to be comfortable locking away their money for five years to access this rate, the one-year equivalent offers a similarly attractive return of 4.72% AER.

“NS&I’s decision to increase rates on its British Savings Bonds is a welcome boost for savers and makes them a far more competitive option in the current fixed rate savings market,” Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, commented.

She adds that “this move from NS&I comes at a time when providers are competing for deposits”, with recent activity in the savings market pushing the top fixed rates higher.

^{Source: National Savings & Investments}

Savers can open NS&I’s British Savings Bonds online by depositing £500 or more. However, it’s important to note that they won’t be able to add to or withdraw from their savings pot after making their initial deposit.

“Act sooner rather than later”

This latest announcement from NS&I is encouraging for savers but, even after the increases to its British Savings Bonds, higher returns can be found elsewhere as many providers have hiked rates recently.

Indeed, savers can now lock in a guaranteed rate of 5.00% AER for three years, thanks to Investec Save’s Fixed Rate Saver. Or, if they won’t need to access a portion of their savings for five years, Atom Bank also pays 5.00% AER on its 5 Year Fixed Saver.

Although the Bank of England base rate (which can influence savings rates) has remained at 3.75% since the start of the year, expectations that it will remain higher for longer (or even increase) seem to have encouraged providers to raise returns over recent weeks.

However, as many factors affect savings rates and the economic situation can quickly change, there’s no guarantee that the trend of rising rates will continue.

Eastell warns that “the most competitive deals can be short-lived”, so any savers who are thinking about opening an account “would be wise to act sooner rather than later”.

Discover the best fixed savings rates

Want to earn a guaranteed return on your money? Whether you’re looking for a one-year bond or a five-year bond, visit our charts to find today’s best fixed rates.

Providing savers with peace of mind

Although there are higher-paying accounts available, British Savings Bonds may still appeal to some savers as all deposits held with NS&I are 100% guaranteed and secure.

By contrast, other savings providers are covered by the Financial Services Compensation Scheme (FSCS), which only protects up to £120,000 per provider.

As a result, Eastell points out that some savers, especially those with larger deposits, may be willing to sacrifice the extra interest offered by the market-leading accounts for the peace of mind that NS&I provides.

When choosing a savings account, it’s important to think about how much you deposit with each provider to ensure your money is fully protected should the worst happen.

However, it’s just as crucial to consider how long you can afford to lock away your money, if at all. Eastell explains that savers should be confident they won’t need to access their cash before committing [to a fixed bond], and that easy access savings accounts are “an ideal alternative for those needing money at short notice, such as for emergency funds”.

The top easy access savings accounts currently pay 5.00% AER, but these include an introductory bonus and, unlike fixed bonds, providers could cut the rate at any time.