National Savings and Investments (NS&I) has announced a significant rate hike across its fixed-term British Savings Bonds, pushing the five-year product to 5.17% gross/AER. The adjustments, announced on October 6, cover one-, two-, three-, and four-year options as the government-backed institution works to attract deposits and meet its £15 billion net financing target.
According to NS&I, the five-year Guaranteed Growth Bond offers 5.17% gross/AER, while the five-year Guaranteed Income Bond pays 5.06% gross, which is equivalent to 5.17% AER. These revised rates mark the first time NS&I’s British Savings Bonds have exceeded 5% since January 2024, providing savers with guaranteed returns amid shifting market conditions.
The New British Savings Bond Rates
The rate increases apply to both new customers and individuals whose existing bonds are maturing. Minimum investments start at £500, with maximum deposits capped at £1 million per person for each issue. The new lineup of rates spans multiple fixed terms:
- 1-Year Bonds: 4.99% gross/AER (Growth) / 4.90% gross, 4.99% AER (Income)
- 2-Year Bonds: 5.07% gross/AER (Growth) / 4.98% gross, 5.07% AER (Income)
- 3-Year Bonds: 5.10% gross/AER (Growth) / 5.01% gross, 5.10% AER (Income)
- 5-Year Bonds: 5.17% gross/AER (Growth) / 5.06% gross, 5.17% AER (Income)
Guaranteed Growth Bonds accumulate interest daily and pay out upon maturity, whereas Guaranteed Income Bonds distribute interest monthly into a designated bank account. Fixed-term accounts do not permit early withdrawals.
Why NS&I is Raising Rates
Andrew Westhead, NS&I Retail Director, noted that the adjustments reflect changes in the broader savings market and help the organization balance the interests of savers, taxpayers, and the wider financial sector.
Financial analysts point out that NS&I is under pressure to secure £15 billion in net financing for the Treasury for the 2026-27 financial year. Following slower deposit inflows earlier in the year, the organization has incrementally raised rates to remain competitive. Sarah Coles, head of personal finance at AJ Bell, observed that the new rates push certain terms, such as the three-year option, into the top 10 most competitive products on the market.
Tax Implications and Considerations for Savers
While the 100% security backed by HM Treasury remains a primary draw for risk-averse savers, experts advise reviewing tax implications and broader market offerings. Interest earned on Guaranteed Growth Bonds is taxed in the single tax year the bond matures, which can potentially breach personal savings allowances or push individuals into a higher tax bracket. Guaranteed Income Bonds spread tax liability across the years the interest is paid.
Savers comparing options are encouraged to check whether challenger banks offering protection up to £85,000 per banking licence provide higher net returns after accounting for personal tax allowances and upcoming tax adjustments.
