NS&I’s latest bond rate cut – why savers will be disappointed

National Savings & Investments (NS&I) has launched a new issue of its 1-year Guaranteed Growth and Guaranteed Income Bond – now branded as British Savings Bonds.

Unfortunately, the headline rate has dropped to 4.04% AER, down from 4.18% offered on the last issue which was launched in July.

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On the face of it, the cut may not look dramatic. However, it is disappointing especially for those customers whose existing NS&I bonds are maturing shortly, but will not have been given access to the 4.18% account.

Many of these will have opened the market-leading 1-year bond that was available from 30th August 2023 which was paying 6.20% at the time. They then rolled over last year into a bond paying 5.15%, which, whilst not market leading was still pretty competitive.

But only those who have already received their maturity letter offering the rate of 4.18% AER can lock in for another year at the higher rate. Those who are yet to receive their letter, will have to accept the lower rate – or move!

This disappointing move might actually be the nudge that people need, to seek a better return elsewhere. Even before this cut, NS&I was lagging behind the competition. In July, when NS&I launched the 4.18% bond, savers willing to shop around could have secured 4.50% AER, fixed for 1-year. Now, with today’s top 1-year fixed rate accounts still paying up to 4.45%, the gap has widened further.

To put this into context, a £10,000 deposit in OakNorth Bank’s 4.45% 1-year fix would generate £445 in gross interest.

The same sum in NS&I’s new 4.04% bond would earn £404 – a difference of £41 in just one year.

That may not sound much on a small deposit, but scale it up to £100,000 and the shortfall is £410. For those rolling over large six-figure balances, the difference really starts to bite.

What stings the most though, is that with inflation remaining sticky, the prospect of any further base rate cuts by the Bank of England seems to have been paused for the time being. As a result, savings rates across the wider market have been broadly stable in recent months, in particular the top fixed rate bonds available.

Even easy-access accounts look stronger. There are accounts paying up to 4.50% beating NS&I’s 1-year fixed deal while allowing flexibility to withdraw as many times as you like – although it should be remembered that these rates are variable so could be cut at any time for both new and existing customers.

Time to twist, not stick

There will of course always be savers who value the unique security that comes with NS&I – the only provider backed directly by HM Treasury. This means that all funds deposited with the state-owned bank is protected, regardless of how much that is. You can deposit up to £1 million into each issue of the British Savings Bonds, plus you could deposit up to £3 million into easy access accounts with NS&I – all protected. For those with six or seven-figure 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.

Unless you need the unique Treasury-backed guarantee for very large sums, it looks better to twist rather than stick – and find another provider who is prepared to pay you more.

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Rates correct as at 25/09/2025

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 planning or tax advice.