- The rates on all NS&I British Savings Bonds have increased today (source: Interest rate increases for selected NS&I products from today | NS&I)
- The one-year growth bond has risen from 4.07% to 4.5%, the two-year bond from 3.98% to 4.48%, the three-year bond from 4.02% to 4.45% and the five-year bond from 4.05% to 4.4%
- NS&I rates had dropped in January when the market was expecting interest rates to keep falling
Sarah Coles, head of personal finance at AJ Bell, comments:
“NS&I is finally making more of an effort to keep up with the Joneses. These are significant rate bumps, putting the fixed rate accounts within shouting distance of the front-runners. The one-year deal is particularly strong, and given that savers are far more likely to fix for one year than any other period, NS&I is clearly working harder to attract more cash.
“It’s not a major surprise, given how rates have been rising elsewhere. NS&I has a duty to offer decent value for savers, so it couldn’t reasonably sit on its hands offering just a fraction over 4%. It has also faced its share of bad news in 2026, and with a fairly punchy funding target of £15 billion this financial year, it has clearly decided that it needs to do something bold to start the year strong.
“Savers can still do better in several accounts elsewhere, so anyone hunting for the best possible deal won’t be tempted by the changes. However, for those attached to the brand or drawn by the appeal of the 100% Treasury guarantee, the rate boost may be enough to tip the balance. If you’re keen, don’t hang around in the hope that inflation fears keep pushing rates up. It’s not clear what will happen to savings rates next given the level of uncertainty around the future path of inflation.”
Three things to ask yourself before you buy
- Do you have the tax-free allowance available for the interest? While NS&I’s Premium Bonds are tax-free, these bonds aren’t, meaning you could pay tax on the interest you earn above your tax-free allowances, just like other cash accounts. If you’re likely to face a tax bill for the interest you might want to weigh up whether an ISA would be a better home for your savings.
- Do you want the interest now or later? The ‘Income Bond’ version will pay interest each month into your bank account. This means it is a good option if you need it to top up your income each month. However, if you don’t need the income the ‘Growth’ option means the interest is rolled up and added to the bond each year, so you can only access it at the end of the fixed term. With growth bonds, the interest is taxable in the year your bond ‘matures’, so large amounts of interest could tip you into another tax bracket.
- NS&I is government-backed, but do you need that? A big appeal of NS&I is that they are backed by the government, so they are seen as the safest place to keep your money. However, other banks and building societies are protected by the Financial Services Compensation Scheme (FSCS), which now covers up to £120,000 of money per person, per financial institution after a hike in December 2025. This means that your money is theoretically as safe in any other bank with FSCS protection as it is with NS&I, although people with large amounts of savings may prefer to put their money with NS&I rather than split it into £120,000 pots with different providers.