Savers with National Savings and Investments (NS&I) have been dealt another disappointing blow as the government-backed provider has launched new issues of its British Savings Bonds with significantly reduced interest rates.
Rate Cuts Across the Board
The Treasury-backed institution confirmed the cuts, stating they reflect "changes in the wider market." This move comes just two months after NS&I had increased rates in November, a temporary boost that now appears to have been reversed.
The new rates fall well below the best fixed-term savings accounts available from commercial banks. All of the new British Savings Bonds now pay below 4.2%, with half of the offerings paying between 3.91% and 3.98%.
The specific changes, effective from Wednesday 7 January 2026, are as follows:
- One-year Growth Bonds: Reduced from 4.20% to 4.07% AER.
- Two-year deals: Reduced from 4.10% to 3.98% AER.
- Three-year versions: Reduced from 4.16% to 4.02% AER.
- Five-year versions: Reduced from 4.15% to 4.05% AER.
Market Context and Expert Reaction
The reduction follows the Bank of England's decision in December to cut the base rate from 4% to 3.75%, the fourth such cut of the year. While this benefited some mortgage borrowers, it continued a tough period for savers.
Personal finance expert Kevin Mountford, co-founder of Raisin UK, warned savers about complacency. "NS&I cutting rates so soon after a November increase is a clear reminder that even the safest names do not always offer the best home for your savings," he said.
He emphasised that "doing nothing can be costly" and urged savers to consider other fully protected accounts under the Financial Services Compensation Scheme (FSCS) that offer more competitive rates.
Why NS&I Adjusts Its Rates
Sarah Coles, head of personal finance at Hargreaves Lansdown, suggested the November rate rise was likely a tactical move to stem outflows of savings, which had been a problem in September. "There was actually a significant rise in savings in November, when £2.45 billion was paid into NS&I, so now those higher fixed rates have done the job, cuts were in order," she explained.
NS&I operates under a mandate to balance the interests of its savers, taxpayers, and the broader financial services sector. It also has an annual net financing target, with money invested contributing to government spending. The provider stated these latest changes will help it meet that target while maintaining this balance.
The bonds, which are fixed-term issues of NS&I’s Guaranteed Growth and Income Bonds, require a minimum investment of £500 and have a maximum limit of £1 million per person per issue. Funds cannot be withdrawn early.
Despite the cuts, NS&I continues to offer 100% capital security due to its Treasury backing, a feature that remains a key draw for its 24 million customers.
