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NS&I hikes rates on British Savings Bonds – are they worth opening?
It’s the first time since 2010 that all four bond terms are on sale together
National Savings & Investments (NS&I) has boosted rates on its range of fixed-term British Savings Bonds, offering returns of up to 4.1% AER.
Savers can choose from one, two, three and five-year accounts, investing between £500 and £1m. But the new deals are far from market-leading.
Here, Which? takes a closer look at how the account stacks up against other fixed-term products on the market and explains what you should know before investing.
What do British Savings Bonds offer?
NS&I offers two types of British Savings Bond – a name given to the provider's range of fixed-term accounts by former Chancellor Jeremy Hunt in last year's Spring Budget.
Guaranteed Growth Bonds pay interest annually, and Guaranteed Income Bonds pay returns into savers' nominated current accounts every month. Both allow you to invest between £500 and £1m.
This table shows the accounts ordered by term:
| Account | Rate from 15 April 2025 |
|---|---|
| 1-year Guaranteed Growth Bonds | 4.05% gross/AER |
| 1-year Guaranteed Income Bonds | 3.98% gross/4.05% AER |
| 2-year Guaranteed Growth Bonds | 4% gross/AER |
| 2-year Guaranteed Income Bonds | 3.93% gross/4% AER |
| 3-year Guaranteed Growth Bonds | 4.1% gross/AER |
| 3-year Guaranteed Income Bonds | 4.03% gross/4.1% AER |
| 5-year Guaranteed Growth Bonds | 4.06% gross/AER |
Source: NS&I.
NS&I's one-year and five-year British Savings Bonds have been put back on general sale and the rates of two-year and three-year bonds have also risen. It’s the first time that bonds for all four terms have been on sale at the same time since 2010 and demand is likely to be high.
When the one-year version of these bonds went on sale in August 2023, over a quarter of a million savers stashed more than £10bn in the accounts. Although that's largely down to the fact the accounts paid a market-beating 6.2%.
What's the difference between gross and AER?
Like many providers, NS&I lists rates using the terms gross and AER. The former is best understood as the flat rate of interest that's actually paid, while the latter takes into account the effect of compounding – the snowball effect of income earned from interest growing together with your original investment.
Understanding the difference between gross and AER matters when it comes to Income Bonds. Because returns are paid out into your nominated bank account every month, interest isn't compounded.
The lower gross rate that NS&I quotes for those products is therefore a more accurate reflection of the amount of savings income earned over the course of a year.
NS&I is unusual in formally separating its fixed-term bonds by how they pay out. With most providers, it’s the same account, and you make the decision of how interest will be paid when you apply. So when choosing, consider if you really need interest paid out, and whether it’s worth it.
- Find out more: best savings accounts
Could you get a better rate elsewhere?
British Savings Bonds offer inflation-beating rates, but how do they compare with the competition?
This table shows the top fixed-term savings accounts, ordered by rate:
| One-year fixed rate | LHV Bank | 4.65% | £1,000 | Mobile app | On maturity |
| Two-year fixed rate | Cynergy Bank | 4.57% | £1,000 | Internet | Yearly |
| Three-year fixed rate | Cynergy Bank | 4.55% | £1,000 | Internet | Yearly |
| Four-year fixed rate | JN Bank | 4.51% | £100 | Internet | Yearly |
| Five-year fixed rate | Secure Trust Bank | 4.56% | £1,000 | Internet | Yearly |
Table notes: rates sourced from Moneyfacts on 23 April 2025.
As you can see, all of the new British Savings Bonds rates pay less than the current market leaders. In the case of the one-year account, the rate is also below April's average of 4.19% AER.
Savers choosing to open a fixed-term account with NS&I are therefore missing out on potentially hundreds of pounds worth of interest. For example, the current market-leading one-year fixed rate account pays 4.65%, while the NS&I version pays 4.05%. For someone saving £25,000, that adds up to £150 of lost interest over the year.
That said, 100% of deposits in NS&I savings accounts are backed by HM Treasury. Under the Financial Services Compensation Scheme (FSCS), only deposits of up to £85,00 per person per institution are normally protected.
- Find out more: What is National Savings and Investments?
Rates are climbing – but for how long?
NS&I isn't the only provider giving savings accounts a boost. A flurry of interest hikes pushed the average rate of a one-year fix up from 4.15% AER to 4.19% between March and April. It's the biggest month-on-month rise since July 2024. The average longer-term fixed bond also rose to 4.02%, breaching 4% for the first time in half a year.
Market turmoil in response to new US import tariffs is one likely reason why providers have been busy repricing their fixed bonds. The time of year is another factor.
Laura Suter, director of personal finance at AJ Bell, says the end and beginning of a new tax year in March and April means more people are getting their savings in order and hunting around for new accounts, which usually sparks a rise in savings rates as banks look to snap up savers’ money.
The savings market is notoriously volatile and top deals can vanish as quickly as they appear. So savers might not want to wait around for rates to go up further.
What to consider before fixing your savings
Think carefully before you rush to take advantage of the record rates offered by shorter-term fixed bonds.
You may find better returns in the long run with a two, three, four or five-year account. That's because if you want to reinvest your savings once the one-year bond matures in 12 months, savings rates could be significantly lower than now.
Also, remember that higher interest rates could land you with a tax bill.
The personal savings allowance means basic-rate taxpayers can earn up to £1,000 a year in savings interest tax-free, while higher-rate taxpayers get a £500 limit. Additional-rate taxpayers have no personal savings allowance.
In a climate of low savings rates, these allowances have been more than enough for most savers not to worry about exceeding them, but the higher rates rise, the easier it is to end up with a tax bill.
Basic-rate taxpayers earning 4.65% AER on their savings could end up paying income tax on interest earned with £21,506. If you're a higher-rate taxpayer, the tipping point drops to just £10,753.
- Find out more: the personal savings allowance explained
