Interest Rates on British Savings Bonds Reduced by NS&I - Are They Still a Profitable Option?
In the current economic climate, where interest rates are expected to fall further next year, finance experts are advising savers to secure a guaranteed rate for their savings sooner. However, National Savings & Investments (NS&I) has recently cut the rates for its British Savings Bonds, making them less competitive compared to retail banks.
Following the latest rate cuts, the current best fixed-rate bonds in the UK offer around 4.4% to 4.5% AER. In contrast, the NS&I British Savings Bonds rates have been reduced, with the two and three-year rates now standing at 3.5% AER and 3.49% AER respectively.
The leading 2-year fixed bond is GB Bank at 4.43% AER, while the best 3-year fixed bonds hover around 4.42% to 4.45% AER from Cynergy Bank and GB Bank. These rates come from Moneyfacts and Moneyfactscompare as of late June 2025.
Sarah Coles, head of personal finance at Hargreaves Lansdown, suggests that NS&I's rate cuts could indicate it is ahead in fundraising. Rachel Springall, finance expert at comparison site Moneyfacts, states that NS&I's British Savings Bonds may still be appealing to savers with large pots who are willing to forgo higher interest rates.
However, for those comparing NS&I with current best retail fixed-rate bonds, GB Bank and Cynergy Bank bonds at around 4.4%-4.5% AER for 2- and 3-year terms currently represent the best alternatives. It's important to note that NS&I bonds allow investment up to £1 million, all protected by the British government.
NS&I traditionally reacts to interest rate moves within the wider markets to avoid being ahead of the competition. The wider market has taken a hit in response to the latest decisions from the Bank of England. The Bank has cut interest rates twice since the summer.
Savers should keep an eye on their accounts as NS&I is not immune to rate cuts. Existing customers who renew a maturing five-year bond can do so at a rate of 3.4% AER (down from 3.9% AER previously). Savers can earn 3.6% AER on NS&I's two-year bonds.
The latest moves by NS&I are perhaps unsurprising given today's falling interest rate environment. NS&I raised £11.3 billion last year, overshooting its funding target of £7.5 billion (plus or minus £3 billion). The organisation needs to ensure it meets its net financing targets, so it prices its accounts accordingly.
In conclusion, while NS&I British Savings Bonds may still be appealing to some savers, competitive retail banks such as GB Bank and Cynergy Bank offer slightly higher fixed bond rates for similar terms. Savers seeking better returns than NS&I should consider these fixed-rate bonds available online with comparable or better interest rates.
[1] Moneyfacts, 2025. [2] Moneyfactscompare, 2025.
- Given the latest interest rate environment and NS&I's rate cuts, investors would be better off considering personal-finance options such as fixed-rate bonds from retail banks like GB Bank and Cynergy Bank, which offer around 4.4% to 4.5% AER for 2- and 3-year terms.
- The current best fixed-rate bonds in the UK, from GB Bank and Cynergy Bank, are competitive with NS&I's British Savings Bonds, but they offer slightly higher interest rates, making them a preferred choice for savers seeking better returns.
- In personal-finance management, it's crucial to keep tracking your savings accounts and consider alternatives that offer higher interest rates, like the fixed-rate bonds available online from banks such as GB Bank and Cynergy Bank, which may provide comparable or better returns than NS&I's British Savings Bonds.
