NS&I Raises Savings Rates, Exceeding 5% for First Time in Nearly Three Years
The Treasury-backed institution has increased interest rates on its fixed-rate savings accounts, with some now offering 5.17%.
National Savings and Investments (NS&I) has increased the interest rates on its British Savings Bonds, with its highest-paying accounts now offering 5.17%. This marks the first time these accounts have surpassed the 5% threshold in nearly three years, with the previous instance occurring in January 2024.
The bonds are available for terms of one, two, three, and five years, in both Guaranteed Growth Bonds that pay interest at maturity and Guaranteed Income Bonds that pay interest monthly. These rate adjustments are intended to help NS&I achieve its net financing target of £15 billion. The institution stated that the increases reflect changes in the broader savings market.
The one-year fixed-rate bond now offers 4.99%, an increase from its previous rate of 4.82% and significantly higher than the 4.04% offered a year ago. For comparison, the best one-year fix available in independent savings tables is currently 5.12%. A saver with £20,000 in a one-year fix would now earn approximately £1,021 in interest over the year, compared to £823 previously. The one-year income bond version has seen its rate rise from 4.72% to 4.88%.
For two-year bonds, NS&I is now offering 5.07%, up from 4.81% previously and 4.25% two years ago. These rates are approaching the best available in the market, which stand at 5.15% for two-year fixes. The monthly income version for the two-year bond now pays 4.96%, an increase from 4.71%.
These fixed-term accounts do not permit early withdrawal of funds. Savers can open accounts with a minimum of £500, up to a maximum of £1 million per person for each issue. All funds invested with NS&I are fully backed by the Treasury.
After the fixed term concludes, savers have the option to withdraw their funds or reinvest them into a new term.
The three-year and five-year fixed-rate bonds are now offering 5.1% and 5.17% respectively. Their monthly income counterparts are paying 4.99% and 5.06%. The highest rate for a five-year fix in the current market is 5.35%.
Compared to October 2023, NS&I's three-year fix was significantly higher at 5.8%. In October 2023, NS&I also offered a highly popular one-year fix at a 6.2% rate. For context, a five-year fix offered by NS&I in October 2021 was only 1.65%.
Unlike Premium Bonds, which offer tax-free prizes, and ISAs, which provide tax-free interest, these savings bonds are subject to tax. Furthermore, with interest paid at maturity, savers may exceed their Personal Savings Allowance, as the earned interest counts towards their taxable income for the tax year in which the bond matures.