Savers have suffered another disappointing blow as NS&I launched new issues of its British Savings Bonds – but with lower interest rates well below the best normal savings accounts on the market.
The move reflects “changes in the wider market”, the Treasury-backed provider said.
In December, the Bank of England base rate was cut from 4 per cent to 3.75 per cent, in a boost to some mortgage borrowers but a blow to savers as it was the fourth rate cut of the year. Previously, interest rates of 5 per cent and above were readily available with a range of banks, but with a couple of exceptions, most only just top 4.2 per cent in January 2026.
All of the newest British Savings Bonds are below even that, with one-year Growth Bonds offering 4.07 per cent and one-year Income Bonds paying 4.00 per cent. Half of the offerings from NS&I pay between 3.91 and 3.98 per cent.
Presently the best commercial fixed-term bonds are 4.27 per cent, or 4.47 per cent with a boost.
Kevin Mountford, co-founder and personal finance expert at Raisin UK, said: “NS&I cutting rates so soon after a November increase is a clear reminder that even the safest names do not always offer the best home for your savings.
“While NS&I still appeals to people who value simplicity and a Treasury guarantee, the trade-off is now very obvious in the form of lower returns.
“When rates are moving, doing nothing can be costly. Many savers will roll over or stay put out of habit, but that can quietly erode the value of their money. There are still better safe havens available, with competitive fixed and easy access accounts offering higher rates while remaining fully protected under the FSCS.”
NS&I is set annual net financing targets and money invested in it contributes towards government spending. It also has a duty to balance the interests of savers, taxpayers and financial services.
The provider said the changes to its rates will help it to meet its net financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector.
British Savings Bonds are fixed-term issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.
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They are available to people wanting a guaranteed rate for a fixed-term of one, two, three or five years. Funds cannot be withdrawn early with fixed-term accounts.
Savers will need a minimum investment of £500 and can invest a maximum of £1 million per person in each issue.
- One-year versions of the bonds, which had previously been on sale with a rate of 4.20% AER (annual equivalent rate), will now be available at 4.07% AER.
- Two-year deals, which had been offered at 4.10% AER, are now being offered at 3.98% AER.
- Three-year versions, which had been available at 4.16% AER are being offered at a rate of 4.02% AER.
- Five-year versions, which were previously offered at a rate of 4.15% AER, will now be available at 4.05% AER.
The bonds are available to new customers, and those with existing bonds which are due to mature.
NS&I said that existing British Savings Bonds customers who have already received their 30-day maturity letter will receive the interest rate quoted in the letter.
In November, NS&I had increased rates on British Savings Bonds, bucking trends seen elsewhere in the savings market.
NS&I offers a range of savings and investments to more than 24 million customers.
All products offer 100% capital security due to the provider being backed by the Treasury.
Sarah Coles, head of personal finance, Hargreaves Lansdown said: “If you blinked, you’ll have missed higher NS&I bond rates, because just two months after they were boosted, they’ve been trimmed back again. This isn’t a surprise.
“The autumn and winter tend to see more fixed-rate accounts mature, so there’s always a risk that savers will take their money and leave. That was definitely a theme in September, when money was flowing out of NS&I.
“There’s every chance that this temporary boost was designed to stem the flow. There was actually a significant rise in savings in November, when £2.45 billion was paid into NS&I, so now those higher fixed rates have done the job, cuts were in order.
“The good news is that the bonds are still offering more than they did before the November bump. However, the bad news is that they fall short of the most competitive deals in the market.
“The fixed-rate market has held up impressively in the face of the Bank of England rate cuts – in part because the market isn’t expecting many interest rate cuts in 2026.”
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