NS&I offers two- and five-year fixed rate savings bonds for the first time since 2009: How good are the rates?

It’s been 15 years since savers were able to open new two- or five-year fixed-rate savings accounts with NS&I.

But that has all changed as today the Treasury-backed savings bank has launched new two- and five-year fixed-rate versions of its British Savings Bonds.

Savers will now be able to open two-year UK Savings Bonds paying a rate of 4.6 per cent for the annual interest payment version, or 4.5 per cent for the monthly income version.

The five-year UK Savings Bonds will pay 4.1 per cent interest, or 4.02 per cent for the monthly income version. These accounts were last on sale to new savers in October 2009.

NS&I has also raised the rate on its existing three-year UK savings bonds, but only for new savers.

The interest rate on three-year bonds has been raised from 4.15 percent to 4.35 percent.

Customers who already have the three-year version will continue to receive a rate of 4.15 percent.

This follows NS&I’s announcement of a new exclusive rate for the 220,000 savers who amassed £10bn in one-year issues of National Savings & Investments Guaranteed Income and Growth Bonds, the best ever last year.

What are NS&I UK Savings Bonds?

UK Savings Bonds are fixed-term versions of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.

These accounts are open to new savers who deposit at least £500 in bonds as an initial investment. The maximum a saver can invest is £1 million.

Dax Harkins, chief executive of NS&I, said: ‘It’s been 15 years since we last had two- and five-year fixed-term bonds on general sale for new investment.

‘Today’s changes will help us meet our Net Funding target while continuing to balance the interests of savers, taxpayers and the broader financial services sector.’

NS&I has around £21.4 billion invested in Guaranteed Growth Bonds from 477,000 customers and around £7.5 billion invested in Guaranteed Income Bonds from 81,000 customers as at 31 March 2024.

The new bonds will help NS&I meet its net funding target – the money it is expected to contribute to the Treasury. Last week, NS&I announced a net funding target of £9bn, with a margin of plus or minus £4bn, by 2024/25.

How do they compare to other savings accounts?

The new bonds do not offer as much interest as market-leading savings accounts, but are still likely to be popular with savers.

Andrew Hagger, founder of MoneyComms, said: ‘The new two- and three-year rates are well behind RCI Bank’s current best buys of 5 per cent and 4.76 per cent respectively, although they may not last much longer following last week’s base rate cut.

‘Some savers may want to lock in a decent rate for longer given that further rate cuts are forecast over the next six to nine months.

‘These products will undoubtedly appeal to those with balances above the FSCS limit of £85,000.’

Any money deposited with NS&I is 100 per cent guaranteed by the Treasury.

The best two-year fixed-rate accounts pay more than 5 per cent interest, This is Money’s independent savings tables show.

Access Bank offers a two-year fixed rate account that pays 5.06 per cent. A saver who puts £10,000 into this account would have £11,063 at the end of the two-year term, according to This is Money’s savings calculator.

A saver who puts £10,000 into the new two-year NS&I contract would have £10,962 at the end of the two-year term.

The best three-year fixed rate account currently on offer from RCI bank is offering 4.67 per cent. A saver who deposits £10,000 into this account will have £11,532 at the end of the three-year term, while a saver who deposits at NS&I’s new 4.35 per cent three-year rate will have £11,391.

The best five-year fixed-rate accounts pay more than 4.5 per cent interest. The best of the best is Hampshire Trust Bank, which pays 4.55 per cent interest.

A saver who keeps £10,000 in this account for five years would have £12,549 at the end of the term, while a saver who keeps this amount in the NS&I five-year deal would have £12,271 at the end of the term.

With an NS&I savings account, because they are backed by the Treasury, any money you invest is 100 per cent protected.

Even if you invest more than the amount supported by the Financial Services Compensation Scheme (FSCS) – up to £85,000 per person or £170,000 for joint accounts.

UK Savings Bonds are taxable, unlike some NS&I products such as Premium Bonds.

> Fixed rate accounts: check out This is Money’s best buys tables