- One-year British Savings Bond will now have 4.18% interest
- Previous version had 4.05% interest
- Income and Growth versions of the bond on offer
Laura Suter, director of personal finance at AJ Bell, comments on NS&I’s latest rate rise on its British Savings Bonds:
“NS&I has given its British Savings Bonds a slight facelift with a small rate rise, but savers shouldn’t get too excited. The new one-year fixed-rate bonds now pay 4.18% if you opt to have your interest paid at the end, or 4.11% if you want monthly payouts. That nudges the bonds closer to the top of the best buy tables, but they’re still nowhere near leading the pack.
“These aren’t brand-new products – NS&I previously simply rebranded the Guaranteed Growth and Guaranteed Income bonds it already offered, slapped a Union Jack on them, and tweaked the rate slightly. The aim is clearly to drum up more interest by tapping into the patriotic branding, but the underlying product is very much the same.
“The rate on offer is a far cry from the original one-year British Savings Bond that launched two years ago which proved to be a sell-out success, being pulled from sale after just five weeks. But back then savers were offered a generous 6.2% – a rate that now looks like a relic from another era. With interest rates edging down and other providers trimming their fixed-rate deals, NS&I has clearly tried to find a middle ground that will be attractive enough to draw in some money but not so generous that it’s swamped by demand.
“For some savers, the government-backing of NS&I will be the main draw. With full protection on deposits up to £1 million, it removes the hassle of having to split savings across multiple banks to stay under the FSCS limit of £85,000. But for others, that safety net comes at a cost. You can get better returns elsewhere if you’re willing to forgo the government guarantee – for example, the top one-year bond for someone with £1,000 or more to save is 4.53% from GB Bank. It means that someone with £1,000 of savings is giving up £3.50 a year for the peace of mind NS&I offers. Clearly the bigger your savings pot, the more interest you’re leaving on the table – those with savings of £20,000 will be sacrificing £70 over a year for plumping for NS&I.
“The key is to weigh up what matters more: a slightly higher return, or the security and simplicity of stashing your cash with NS&I. The £500 minimum deposit makes it relatively accessible, and the choice between receiving interest monthly or at maturity adds some flexibility depending on your needs – particularly helpful for retirees who want regular income. Savers hunting for higher returns should check out best buy tables or cash savings hubs, such as AJ Bell’s Cash Savings hub, where they can access a range of savings accounts from different providers all in one place.
“But savers do need to be aware of the downsides. You can’t access your money early, even if rates rise or your circumstances change – it’s locked away for the full 12 months. And unlike Premium Bonds, these savings aren’t tax-free. If you’re a higher-rate taxpayer and already maxing out your personal savings allowance, you’ll face a tax bill on the interest. It’s another reminder to consider whether your ISA allowance could be better used for cash savings. Ultimately, this is a decent option for those who value security and simplicity over chasing the best possible return.”
