Sunita Somvanshi
National Savings and Investments has increased its fixed-term British Savings Bond rates, effective today. The highest rate — 5.17% gross/AER — applies to the five-year term. The one-year rate is 4.99%, the two-year is 5.07%, and the three-year is 5.10%. Whether these figures are the right choice for a given saver depends almost entirely on one number: the deposit amount.
NS&I’s updated British Savings Bonds pay the following rates: one year at 4.99%, two years at 5.07%, three years at 5.10%, and five years at 5.17% gross/AER. Growth (interest compounded at maturity) and Income (interest paid monthly) options are both available. The minimum deposit is £500; the maximum is £1 million per person per issue. All NS&I deposits are backed 100% by HM Treasury — not subject to the £85,000 cap that applies to commercial bank deposits under the Financial Services Compensation Scheme. Early withdrawal is not permitted once the account is past its 30-day cancellation window.
If your savings total under £85,000, commercial fixed-rate bonds at smaller regulated banks may currently offer higher rates while carrying full FSCS protection. NS&I’s Treasury backing provides complete principal protection on the full balance with no counterparty credit risk — a benefit that applies at any balance level, and becomes especially significant when deposits exceed the £85,000 FSCS protection limit that applies at commercial banks. If you hold more than £85,000 in cash and want to avoid splitting funds across multiple institutions, NS&I’s unlimited Treasury guarantee gives something no commercial bank can match.
What to check before committing
Interest on British Savings Bonds is taxable income. Basic-rate taxpayers can receive up to £1,000 in savings interest tax-free per year under the Personal Savings Allowance; higher-rate taxpayers have a £500 allowance. A five-year bond at 5.17% on a £100,000 deposit produces approximately £5,170 in gross interest annually — which would exhaust a basic-rate taxpayer’s full Personal Savings Allowance and generate an additional tax liability on the remaining balance. If you hold savings inside a cash ISA, the tax-free environment there may offset a marginally lower rate more effectively than a taxable NS&I bond at a higher headline figure.
The early-access restriction is absolute. Unlike some commercial fixed-rate accounts that allow early closure subject to an interest penalty, NS&I British Savings Bonds cannot be accessed before the maturity date after the initial 30-day cooling-off period. If there is any realistic possibility you will need the funds during the term — whether for planned home maintenance, care costs, or an unexpected expense — an easy-access account earning a lower rate may serve you better.
Some commercial institutions are currently offering two- and three-year fixed terms above 5.25%. Our guide to current UK fixed-rate savings accounts lists the top rates available with FSCS status confirmed. If your balance sits comfortably below £85,000 and flexibility is not a concern, checking the commercial market before committing to NS&I is worthwhile. A comparison of cash ISAs versus fixed-rate bonds covers the tax treatment in detail for those weighing the wrapper as much as the rate.
Locking in a fixed rate secures current yields and protects the saver from future rate reductions, though it also means not benefiting if rates rise. NS&I does not publish a closing date for rate offers. We will update this piece if rates change, and again when the Bank of England’s next base rate decision is announced.
