NS&I hikes rates on British Savings Bonds

National Savings & Investments (NS&I) has announced rate increases across its Guaranteed Growth Bonds and Guaranteed Income Bonds – otherwise known as British Savings Bonds. This announcement came just ahead of the latest Bank of England Monetary Policy Committee (MPC) meeting, where the base rate was held at its current level of 3.75%.

What is telling however, is how the votes went at this meeting compared to the last. On 19th March, just three weeks into the conflict in the Middle East, the MPC voted to keep base rate on hold, following six previous cuts since August 2024. At that stage, the vote was unanimous – with all nine members on the same page.

But with the ongoing conflict, which has seen the price of fuel rocket upwards and with inflation expected to tick up further, one of the members, Huw Pill, voted for an increase this time around, which means the possibility of a rate hike has far from gone away. 

In fact, the markets are now expecting to see two or three rate rises this year! A complete turnaround from a couple of months ago, when the trajectory was downwards.

Whilst bad news for those with debt, this news has seen a boost for savers, as savings rates have improved significantly, especially fixed rate accounts. At the beginning of February 2026, before the conflict began, the top 1-year fixed rate bond available was 4.25% - today you can earn 4.67% with Kent Reliance. Similarly, over 5-years the top rate available has increased from 4.31% to 4.70% which is available via two providers, GB Bank and the Market Harborough Building Society.

Things are changing fast though, so keep an eye on our Best Buy tables for the current rates.

Even NS&I is getting in on the action  

The new issue of the NS&I 1-year British Savings Bond has increased from 4.07% to 4.50% AER, whilst the 2-year bond has increased from 3.98% to 4.48%. The 3-year bond has increased from 4.02% to 4.45% whilst the 5-year bond has seen the lowest increase, from 4.05% to 4.40%.

The bonds also have a monthly interest option, giving savers the choice of either a regular income or to have all the interest paid at the end of the term. This choice can be important though, particularly for those who pay tax on their savings.

With the longer-term bonds, if you opt to have the interest added to your bond each year and left to compound, it won’t be accessible until maturity. And from a tax perspective, that means the interest will be treated as if it were received in one go at the end.

This matters because you can’t spread the interest over the term for tax purposes, and your Personal Savings Allowance (PSA) can’t be carried forward from one year to the next. So, if your total interest in the maturity year exceeds your PSA, you could find yourself paying tax on the excess – and possibly nudged into a higher tax band too, for that tax year.

For many savers this might not have a major impact, but it’s well worth keeping in mind.

Why is NS&I increasing rates now?

Whilst these increases could be a reaction to the rest of the market, NS&I often changes the rates it is offering, to either increase or stem the flow of funds into the state owned Bank, in order to meet its Net Financing Target. This is the amount NS&I is tasked with raising on behalf of the Government each tax year – and takes into account both inflows and outflows. For the 2026/27 tax year, that target has been increased from £13.6 billion to £15 billion. In addition, the back-office issue that was recently unearthed, that many families had not been repaid all the funds from their loved one’s accounts following a bereavement claim, may have led to some withdrawing their funds, which will need to be replaced.

Are the new rates competitive?

These latest rates are certainly more competitive, particularly compared to the high street names. Currently the 1-year bonds available from the main high street providers pay between 3.15% (Lloyds Bank) to 4% (Nationwide).

However, there are still better-paying options available for those happy to look beyond the household names, as the table show. For example, a £50,000 deposit for 12 months would earn £2,250 (before the deduction of tax) with NS&I’s 1-year bond, compared with £2,335 with Kent Reliance, which as mentioned above is currently paying 4.67%.

NS&I Guaranteed Growth Bonds (British Savings Bonds) vs the best accounts available 

So, whilst NS&I’s new rates are a marked improvement, they don’t make it into the best-buy tables.

Despite rarely offering the top rates, NS&I continues to attract huge loyalty based on its longevity and unique protection. Every penny held with the provider is 100% backed by HM Treasury, offering unmatched peace of mind. You can invest up to £1 million into each issue of these bonds, making it 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. 

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Rates correct at 01/05/2026

This article is for information only and does not constitute individual advice. 

The Financial Conduct Authority (FCA) does not regulate cash or tax advice.