NS&I raises British Savings Bonds rates to 5.17% AER

NS&I has increased the interest rates on its British Savings Bonds up to 5.17%. The savings institution, backed by HM Treasury, raised rates across its one, two, three and five-year fixed-term British Savings Bonds, which pay a guaranteed amount of interest for the term.

The five-year fixed-term account now pays up to 5.17% AER, an uplift of 0.32%, while the one-year fixed-term account pays 4.99%. Customers can save anything from £500 to £1 million. However, funds cannot be withdrawn early with fixed-term accounts, so savers need to decide if they can part with their money for a fixed period.

Expert reaction to the rate increases

Rachel Springall, finance expert at Moneyfactscompare.co.uk, urged savers to keep an accessible pot of money aside for emergencies, since the cash cannot be withdrawn. She said the increased rates were a "welcome boost," with uplifts of up to 0.32%, but noted that other suppliers were offering higher rates.

Addressing the new interest rates, Ms Springall said: "This is likely to grab the attention of savers looking for a guaranteed return, particularly those who value the reassurance of having their money 100% backed by HM Treasury."

"The increases are healthy, with its longer-term fixed bond seeing the biggest uplift, such as with the five-year Guaranteed Growth Bond rising by 0.32% from 4.85% to 5.17% gross/AER. However, savers will find rates higher elsewhere, as all these newly priced bonds from NS&I sit outside of the top rate tables."

Account options and new rates

NS&I savers can choose between a Guaranteed Growth Bond account, which pays interest when the bond matures, or the Guaranteed Income Bonds account, which pays out the income on a monthly basis.

"This flexibility could appeal to those who want to supplement their income, as well as savers who would rather leave their interest untouched to benefit from compounding interest," Ms Springall added.

Andrew Westhead, NS&I retail director, said the increased interest rates across the 1, 2, 3, and 5-year British Savings Bonds were "responding to changes in the wider market and giving savers the certainty of a guaranteed return for the duration of their chosen term".

He added: "Alongside these improved rates, customers continue to benefit from the reassurance that all money invested with NS&I is 100% secure and backed by HM Treasury."

The new rates for British Savings Bonds are as follows: