NS&I raises rates on its British Savings Bonds: How do they compare?

These latest increases mean NS&I bucks the trend seen in the wider market.

New issues of the British Savings Bonds from Government-backed brand, National Savings & Investments (NS&I), went on sale today – offering consumers a higher return than their predecessors.

The one-year NS&I Guaranteed Income and Growth Bonds Issues 87 now pay 4.20% AER monthly or on anniversary, respectively (having previously paid 4.04% AER). Meanwhile, their two-, three- and five-year counterparts offer 4.10% AER, 4.16% AER and 4.15% AER, respectively (formerly priced at 3.85% AER, 3.88% AER and 3.84% AER).

“I’m pleased that we can offer increased interest rates on these fixed-term products, giving savers who want guaranteed returns a choice in how they invest,” said Andrew Westhead, Retail Director at NS&I. “Today’s changes ensure we continue to balance the interests of savers, taxpayer and the broader financial services sector,” he added.

Each of the accounts can be opened and managed via the NS&I website with a £500 minimum deposit. But, as neither further additions nor early access are permitted, savers should consider their opening amount carefully. Discover further details on our fixed bond charts.

How do NS&I’s British Savings Bonds compare?

These latest hikes mean NS&I’s British Savings Bonds buck the trend seen in the wider savings market; typical returns on fixed bonds fell across the board between October and November, according to Moneyfacts data. What’s more, they offer well above the Moneyfacts Average Savings Rate which sits at 3.42% (on a first-of-month basis).

“It’s crucial savers make sure that their savings accounts are working as hard as possible,” said Caitlyn Eastell, Spokesperson at Moneyfactscompare.co.uk. She explained that those holding their hard-earned cash in an ‘average’ savings account risk losing money in real terms to inflation.

To make matters worse, Eastell further warned that a base rate cut may still be on the cards - meaning that savings accounts could take yet another hit. This follows the Bank of England’s most recent decision to hold the UK’s central interest rate at 4% earlier this week.

However, it should be noted that more competitive rates are available – particularly if savers are willing to consider less familiar brands.

NS&I’s British Savings Bonds may nonetheless appeal to savers for their unique 100% backing from HM Treasury. In contrast, deposits in accounts covered by the Financial Services Compensation Scheme (FSCS) are only protected up to £85,000 (per banking licence).