Key facts
- NS&I has increased rates on its British savings bonds to over 5% for the first time in nearly three years.
- The one-year British savings bond rate is now 4.99%, up from 4.82%.
- The five-year British savings bond rate has been increased to 5.17%, up from 4.85%.
- Top-paying one-year fixed-rate bonds from other providers are currently at 5.12%.
- The highest-paying five-year fixed bond offers 5.37% from GB Bank.
- NS&I guarantees 100% of savings above £120,000, unlike most banks.
National Savings and Investments (NS&I) has raised interest rates on its British savings bonds, with some now offering over 5% for the first time in nearly three years. The move comes amid growing competition in the savings market, leading to some of the highest rates seen in years.
Rachel Springall, from financial data website Moneyfactscompare.co.uk, warned that such attractive deals might be short-lived, as providers may withdraw products once they attract sufficient savings. NS&I's British savings bonds, which are rebadged versions of its guaranteed growth and income bonds, offer fixed interest rates over one-, two-, three-, or five-year terms.
The new one-year bond rate is 4.99% (up from 4.82%), the two-year rate is 5.07% (up from 4.81%), the three-year rate is 5.1% (up from 4.83%), and the five-year rate is 5.17% (up from 4.85%).
While competitive, Sarah Coles, head of personal finance at AJ Bell, noted that even higher rates can be found elsewhere. Currently, the top one-year fixed-rate bond pays 5.12% from Union Bank of India (UK), and the highest five-year fixed bond offers 5.37% from GB Bank.
A key advantage of NS&I bonds is the ability to invest up to £1 million per person per bond issue, with a minimum investment of £500. Crucially, NS&I is backed by the Treasury, guaranteeing 100% of savings above the £120,000 Financial Services Compensation Scheme limit offered by most banks.
However, money invested in NS&I British savings bonds cannot be withdrawn before the end of the fixed term, which may not suit all savers. For those needing access to funds, Starling Bank recently announced a table-topping 5% interest rate on its Easy Saver account for new customers, offering unlimited penalty-free withdrawals. This rate includes a 2.5% variable standard rate and a 2.5% fixed bonus for six months, applicable to balances up to £25,000. Starling customers who opened their current account before October 1 can access a 4% rate on their Easy Saver, including a 1.5% fixed interest bonus for six months.
Separately, Marcus by Goldman Sachs increased its one-year fixed-rate savings account rate to 4.75% from 4.3% this week.