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National Savings and Investment has launched new issues of its fixed-rate savings accounts.
From today, savers will be able to open two-year British Savings Bonds paying a rate of 3.6 per cent if they choose to pay interest annually or monthly.
NS&I has also launched a new three-year version of the bonds that pay 3.5 per cent if interest is paid annually or 3.49 per cent if savers opt for the monthly income version.
The rates are lower than those previously offered for the same fixed-rate terms, which paid 4.1 percent for the two-year version and 4 percent for the three-year version.
NS&I said the lower rates reflect “changes in the broader market” and that the new rates “will help NS&I meet its net funding target.”
The Treasury-backed bank has a net funding target for 2024/25 of £9bn, with headroom of plus or minus £4bn.
New launches: NS&I has launched new issues of its two- and three-year fixed rate bonds but at lower rates
Sarah Coles, head of personal finance at stockbroker Hargreaves Lansdown, said the move is a sign that “NS&I may have filled its coffers”.
NS&I also announced that the five-year version of the bonds, which pay 3.9 percent, are no longer for sale to new customers.
British Savings Bonds are fixed-term versions of the NS&I Guaranteed Growth Bonds and Guaranteed Income Bonds that were announced by the previous government in March 2024.
NS&I launched new issues of its two- and five-year fixed-rate bonds in August for the first time in 15 years. Back then, the two-year bond paid 4.5 percent and the five-year version paid 4.1 percent.
It paints a bleak picture for NS&I customers who have faced two cuts to the Premium Bonds prize pool in two months, as well as cuts to NS&I’s Direct Saver and Income Bonds.
How good are NS&I’s new fixed rates?
The new bonuses don’t offer as much interest as the market-leading savings accounts at This is Money’s independent desks.
Savers can find two- and three-year fixed-rate bonds paying 4.6 per cent at Atom Bank.
A saver who invested £10,000 in NS&I’s two-year bond would have £10,745 at the end of the term, This is Money’s savings calculator shows.
While a saver who invested £10,000 in the NS&I three-year bond would have £11,105 in the end.
By comparison, if a saver invested £10,000 in the best buy for two years at 4.6 per cent, they would have £10,962 or £11,477 if they held it for three years.
British Savings Bonds are open to new savers who pay at least £500 into the bonds as an initial investment.
The most a saver can invest is £1 million, fully protected unlike banks who are part of the Financial Services Compensation Scheme which protects up to £85,000 or £170.00 for joint accounts.
Coles said: ‘The cuts will be a huge disappointment to loyal customers who plan to tie up their cash and protect it from future rate cuts.
“Savers should seriously consider whether this is the right place for their money right now.”
> The best fixed rate bonuses: These are Money’s independent savings tables
British savings bonds are taxable, unlike some NS&I products. This means that savers should be alert to failing to meet their personal savings allocation.
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