NS&I widens choice for savers as it releases new bond versions

NS&I, whose products have 100% security as it is backed by the Treasury, said it is 15 years since two and five-year fixed-term deals were on general sale to new investments.

The move follows a cut in the Bank of England base rate last week, from 5.25% to 5%, prompting warnings among some finance experts that savers could expect to see the rates on offer edging down in the coming months.

It also comes after the recent release of NS&I’s annual report and accounts, which showed that it overshot its target for net financing to the Government in 2023/24.

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

The two and five-year fixed-rate Guaranteed Growth Bonds and Guaranteed Income Bonds were last on general sale to new investments in October 2009.

The two-year option offers savers 4.60% AER (annual equivalent rate).

Savers investing in the five-year option will receive 4.10% AER.

The interest rate on the existing three-year British Savings Bonds has increased for new investors from Tuesday, offering 4.35% AER, up from 4.15% AER previously.

NS&I chief executive, Dax Harkins, said: “It is 15 years since we last had two and five-year fixed-term bonds on general sale to new investments. The two new issues, along with a rate increase for our three-year bonds, provide NS&I savers with increased choice and longer-term security in a changing market.

“Today’s changes will help us to meet our net financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector.”

The two, three and five-year fixed-rate Growth and Income Bonds are open to savers wishing to fix at a guaranteed rate for the whole term.

Savers need a minimum investment of £500 and can invest a maximum of £1 million in each issue. After the fixed-term period, savers will have the choice to withdraw their cash or reinvest into a new term.

When customers invest in NS&I products, they are lending to the Government. In return, the Government pays interest or prizes for Premium Bonds.

In its annual report and accounts, NS&I said it delivered £11.3 billion of net financing to the Government in 2023/24, but its target range had been £4.5 billion to £10.5 billion. It said that forecasting inflows and outflows had become harder in the competitive savings market and savers did not withdraw their cash as quickly as anticipated.

Analysis by Moneyfactscompare.co.uk of the wider fixed bonds market found that, at the start of August, the average two-year fixed-rate bond on offer was paying 4.33% and the average five-year fixed bond rate on offer was 3.92%, based on savers having £10,000 to put away. The average three-year bond rate was 4.16%.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk said savers should compare rates across the market.