NS&I boosts bond rates – what does this mean for savers?

National Savings & Investments (NS&I) made an unexpected move at the end of last week, announcing increases to its Guaranteed Growth and Guaranteed Income Bonds (also known as British Savings Bonds). This announcement came the day after the Bank of England voted to keep the base rate at 4%, despite earlier speculation that a cut might be on the cards.

These surprise increases could suggest that NS&I has seen higher than anticipated withdrawals recently, putting them at risk of undershooting their Net Financing Target. This target represents the amount the institution must raise on behalf of the Government, taking into account both money in and money out. For the current tax year, NS&I has been targeted with raising £12 billion (with a leeway of £4 billion either way).

The most up to date figures that are available show that the state-owned bank delivered £2.5 billion of Net Financing to the Government in the first quarter of the tax year (April to June 2025). If they were to continue at that rate, whilst they would deliver within the leeway, it would be less than the target. So perhaps this move is with the hope of not only encouraging new savers but retaining their loyal customers too.

Good news for some, frustration for others

Whilst unexpected, these rate hikes will be welcome news, especially for those who have funds maturing now. But it will be a bitter blow to the thousands who initially opened the market leading 1-year bond paying 6.20% AER which was available from 30th August 2023 until early October that year. Many of those will have rolled their funds over as previous issues matured, but for those who reinvested between 2nd September 2025 until now, they would have committed to the lower rates that were previously available.

Here’s how the new British Savings Bond rates compare to the previous issues: 

The 5-year bond has seen the biggest rise, with a 0.31 percentage point increase. 

Can I take my interest out each year? 

You can choose to have your interest paid out monthly or at the end of the term – and this can be important to remember if you pay tax on your savings. With the longer-term bonds, if you choose the latter, although the interest is added to your bond annually so that you can enjoy compounded interest each year, it will not be accessible until maturity.  

The reason this could be significant is because if all the interest is deemed to have been received in one year rather than spread over the term of the bond, it could mean a larger tax bill, as you can’t spread the interest over the term of the bond and therefore utilise the  Personal Savings Allowance (PSA) each year. 

You can’t roll over any unused PSA, so if you don’t utilise it all in one year, but you earn more than the allowance in the following year, that’s tough luck. You’ll still owe tax on any interest over the allowance for that individual tax year.

For many customers, this may not have too much of an impact, especially if you are already using your PSA. But it’s important to be aware.

And let’s not forget that for some, it could mean that they are pushed into a higher or the highest tax bracket for that year.

Are these new rates competitive?

These new rates are far more competitive, especially when compared to the better-known high street banks. However, you can find higher returns elsewhere, particularly if you are happy to look beyond the high street names. For example, someone depositing £50,000 for 12 months could earn £2,100 (before the deduction of tax) with NS&I, or £2,225 with the best online 1-year bond with Conister Bank which is paying 4.45% AER.

Why would savers stick with NS&I?

There will of course always be savers who value the unique security that comes with NS&I, as well as the comfort of familiarity. All funds deposited with the state-owned bank is protected in full by HM Treasury, regardless of the amount. You can deposit up to £1 million into each issue of the British Savings Bonds. For those with larger cash sums, that reassurance can outweigh the lower rates.

But for the majority of savers, where balances are below the £85,000 covered by the Financial Services Compensation Scheme, sticking with NS&I is unlikely to deliver the best outcome.

Cash platforms are another valuable option for those with more than the FSCS limit. They allow you to manage savings across multiple banks with just one login, often making it easier to stay within protection limits and to switch between products when better rates become available. This can be especially useful for those with larger cash holdings who want both convenience and competitive returns.

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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 cash flow planning.