NS&I makes more rate hikes

Bearing in mind that the Bank of England maintained the base rate at 3.75% at its latest Monetary Policy Committee (MPC) meeting on 18th June, it was interesting to see that National Savings & Investments (NS&I) subsequently announced rate increases to its fixed rate savings accounts, Guaranteed Growth Bonds and Guaranteed Income Bonds – also known as British Savings Bonds.  

What are the new NS&I Guaranteed Growth Bond rates?

• 1-year bond: up from 4.50% to 4.69% AER
• 2-year bond: up from 4.48% to 4.67% AER
• 3-year bond: up from 4.45% to 4.65% AER
• 5-year bond: up from 4.40% to 4.55% AER

Whilst inflation has remained steady in the 12 months to May 2026 at 2.80%, we still expect inflation to jump up a little in the near future, as the effects of the war in the Middle East bite – and we know that the energy price cap increased by 13% this month!  

However, the expectation that the base rate would remain the same this month is reflected by the slowdown in savings rate hikes that we’ve seen recently. So, it’s good news that NS&I is getting in on the action.  

As well as reacting to the rest of the market, NS&I also adjusts rates it is offering, to manage the flow of funds into the state-owned Bank, to help it meet its Net Financing Target - the amount it is tasked with raising for the Government each tax year after taking account of both deposits and withdrawals.  

The target has been increased from £13.6 billion to £15 billion for the 2026/27 tax year. In addition, the recent revelation that some bereaved families had not received all the money due from deceased relatives’ NS&I accounts, may have prompted higher than usual withdrawals. According to the Bank of England, some £160million was withdrawn in the first month of the tax year.*

Be aware if you choose the monthly income option

The British Savings Bonds offer a choice between having the interest paid monthly as income, or allowing it to roll up and be paid at maturity.

That choice is worth thinking about carefully, particularly if you pay tax on your savings.

If you choose to have the interest added to the bond each year so that it compounds, you won't receive it until the bond matures, which could be more important in longer term bonds. For tax purposes, that means all the interest is treated as being received in the tax year in which the bond ends.

Because your Personal Savings Allowance (PSA) can't be carried forward, receiving several years' worth of interest in one tax year could mean you exceed your allowance and pay tax on some of the interest. In some cases, it could even push you into a higher tax band for that year.

It won't affect everyone, but it's certainly something worth considering before deciding how you'd like your interest paid.

Are the new rates competitive?

The latest increases undoubtedly make NS&I more competitive, especially when compared with many of the high street banks.

However, savers prepared to look beyond the familiar names can still find significantly better returns elsewhere.

For example, a £50,000 deposit for 12 months would earn £2,345 (before the deduction of tax) with NS&I’s 1-year bond, compared with £2,450 with Marcus: from Goldman Sachs, which currently pays 4.90% AER.

It's the same with the longer fixed terms. The top 2-year bond is paying 4.86% versus the NS&I bond paying 4.67% Over 3-years, the top rate is 4.85% compared to 4.65% with NS&I and over 5-years you can earn up to 4.90% compared to NS&I’s option which is now 4.55% AER

So, whilst NS&I’s new rates have improved, they don’t make it into the best-buy tables.

Despite rarely topping the tables, NS&I continues to benefit from huge customer loyalty. A key reason is its unique Government guarantee. Every penny held with the provider is backed by HM Treasury, giving savers complete protection, regardless of how much they hold.  

You can invest £500 up to £1 million into each issue of the British Savings Bonds, making them particularly appealing for those with larger sums who prioritise safety over the best returns.

For most savers, though, whose balances fall below the £120,000 Financial Services Compensation Scheme (FSCS) protection limit that applies to all other regulated and authorised banks and building societies, there are still better-value options elsewhere.

*Bank of England Table A7.1 (changes tab) 

For the latest rates, visit our Best Buy tables.

Rates correct 02/07/2026

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The Financial Conduct Authority (FCA) does not regulate tax advice.