National Savings & Investments (NS&I) has lifted rates on its British savings bonds to the highest levels in years, with fixed returns now ranging from 4.99% to 5.17% across one-, two-, three- and five-year terms.
The increase marks the first time in nearly three years that NS&I bonds have paid more than 5%, according to the government-backed savings provider. The bonds are rebadged versions of its guaranteed growth bonds and guaranteed income bonds.
Competition in the savings market has intensified, driving rates higher. However, Rachel Springall of financial data website Moneyfactscompare.co.uk warns that attractive deals frequently vanish once a provider has attracted enough deposits.
The new growth bond rates are: 4.99% for one year (up from 4.82%), 5.07% for two years (was 4.81%), 5.1% for three years (was 4.83%) and 5.17% for five years (was 4.85%). Interest on growth bonds compounds annually and pays at maturity; income bonds pay monthly.
Sarah Coles, head of personal finance at AJ Bell, notes that higher rates remain available elsewhere. At the time of writing, the top one-year fixed-rate bond paid 5.12% from Union Bank of India (UK), while the best five-year deal offered 5.37% from GB Bank.
NS&I bonds allow investments up to £1m per person per issue, with a £500 minimum. The provider highlights that, unlike most banks which guarantee savings only up to £120,000, NS&I is backed by the Treasury and secures 100% of deposits. Funds are invested back into supporting the UK.
Money placed in British savings bonds cannot be withdrawn before the fixed term ends. Savers needing flexibility may prefer easy-access accounts. Starling Bank this month launched an Easy Saver paying 5% on balances up to £25,000 for customers who opened a current account on or after 1 October. The rate comprises a 2.5% variable standard rate plus a 2.5% fixed bonus lasting six months. Pre-October customers receive 4% with a 1.5% six-month bonus.
Marcus by Goldman Sachs also raised its one-year fixed-rate savings account from 4.3% to 4.75% this week.
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