NS&I tweaks British Savings Bonds rates in major boost for UK savers
The state-backed provider stated that the move will help it meet its net financing target
By Vicky Shaw
Savings giant NS&I has increased the rates on its British Savings Bonds, responding to shifts in the financial market.
The state-backed provider stated the move will help it meet its net financing target, while balancing the interests of savers, taxpayers, and the broader financial services sector.
British Savings Bonds are fixed-term issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds. New issues are now available across one, two, three, and five-year durations.
The one-year bond now pays 4.69 per cent AER (annual equivalent rate), up from 4.50 per cent. Two-year bonds offer 4.67 per cent AER, rising from 4.48 per cent.
Three-year versions pay 4.65 per cent AER, an increase from 4.45 per cent, and five-year bonds yield 4.55 per cent AER, up from 4.40 per cent. These new issues are accessible to both new and maturing customers.
A new issue of NS&I’s three-year Green Savings Bonds has also been released with an increased rate of 4.45 per cent AER, up from 3.82 per cent previously.
Andrew Westhead, NS&I retail director, said: “We regularly review our products to ensure they reflect current market conditions, and today’s increases respond to changes in the fixed-term savings market.
“Our fixed-rate bonds offer savers the choice of different term lengths with the certainty of knowing the interest rate they will receive over the full term, alongside the reassurance that all money invested with NS&I is 100 per cent secure.”
NS&I is backed by the Treasury, so money held with it has 100 per cent security.
Sarah Coles, head of personal finance at AJ Bell, said: “The savings market is impressively competitive right now, and NS&I has entered the fray.
“Since the last time NS&I hiked its fixed-rate deals, future rate expectations have fallen, which should be putting downward pressure on rates.
“However, banks are pulling out all the stops to compete, keeping fixed-rate deals higher and forcing NS&I to raise rates again to attract the cash it needs.
“It’s bucking the trend of the rest of the fixed-rate market, which is now rewarding savers very slightly more for tying up their cash for longer.
“NS&I is still offering the best rate on its one-year fix. This is likely to be an indication of what’s going on behind the scenes.
“The one-year market takes more money than any of the other fixed-rate periods.”
She added: “The hike in the Green Bonds is a separate decision, because it doesn’t count towards the net financing target.
“The rise is striking though, from a fairly miserable 3.82 per cent to a reasonably competitive 4.45 per cent.
“The gap between these bonds and the ordinary three-year bonds is much narrower now, so the price you pay for knowing your money is funding green projects has fallen.
“This is a significant departure, and seems to suggest that the previous policy of hoping green-conscious savers would be happier to overlook a much lower rate for the bonds just wasn’t working in attracting the cash they wanted.”