NS&I British Savings Bonds now on sale – is it worth investing?
NS&I British Savings Bonds, first announced by the Chancellor in the Spring Budget, are now available – paying up to 4.15% AER. But should you invest?
Savers can pick from the Guaranteed Growth Bond (paying 4.15% AER) or the Guaranteed Income Bond (paying 4.07%) and invest between £500 and £1m.
The new deals can beat the current rate of inflation (3.4%) but they are far from market-leading. Read on to see how they compare and what you should know before investing.
How do the new NS&I bonds compare?
Despite offering inflation-beating interest rates, the new bonds from NS&I are far from table-topping offers.
Savers willing to shop around can find better deals elsewhere, as you can see from the current crop of market-leading three-year bonds.
| Account | Interest rate (AER) | Minimum investment |
|---|---|---|
| Zenith Bank (UK) Ltd – 3-Year Fixed Term Deposit | 4.67% | £1,000 |
| Oxbury Bank – Personal 3-Year Bond Account | 4.66% | £1,000 |
| Hampshire Trust Bank – 3-Year Bond | 4.65% | £1 |
| Secure Trust Bank – 3-Year Fixed Rate Bond | 4.65% | £1,000 |
| Al Rayan Bank – Educate A Child International Fixed Term Deposit | 4.65% | £5,000 |
| Close Brothers Savings – 3-Year Fixed Rate Bond | 4.65% | £10,000 |
| Shawbrook Bank – 3-Year Fixed Rate Bond | 4.63% | £1,000 |
Source: Moneyfacts, rates correct as of 2 April, but are subject to change.
You can make 4.67% AER on the most competitive three-year bond on the market right now, and five other accounts pay 4.65% or more.
‘NS&I British Savings Bonds may well be doomed to mid-table mediocrity,’ said Sarah Coles, head of personal finance at Hargreaves Lansdown.
‘They’ve gone on sale, offering 4.07% and 4.15% over three years. This is disappointing, especially after the fanfare in the Budget, because it’s so far behind the market leaders. At this rate, these bonds risk disappearing without a trace.’
Interestingly, fixing for longer doesn't necessarily get you the best rate at the moment. The best one-year savings account on the market currently offers 5.25% AER.
- Find out more: best savings accounts 2024
What's in the fine print?
The new NS&I bonds are only available online from NS&I, with support for customers who are unable to transact over the internet. Customers who need extra support can call NS&I's helpline free from the UK on 08085 007 007, or write to them at NS&I, Sunderland, SR43 2SB.
Interest for the Guaranteed Growth bond will be calculated daily, and will be added to the bond on each anniversary of the investment.
The Guaranteed Income bond, on the other hand, will pay out monthly income into the customer’s nominated bank account.
It's important to note that interest paid on British Savings Bonds is not tax-free. If all your interest payments exceed your personal savings allowance in a year, you may have to pay income tax on them.
That said, 100% of deposits in NS&I savings accounts are backed by HM Treasury. Under the Financial Services Compensations Scheme (FSCS), only deposits of up to £85,00 per person per institution are normally protected.
NS&I has also said that interest rates for off-sale guaranteed growth bonds and guaranteed income bonds are also increasing for customers with maturing bonds.
- Find out more: NS&I explained
Is this the only way to be patriotic with your savings?
The new British Savings Bonds were announced in the Spring Budget, along with the promise of a British Isa that will give savers an extra £5,000 allowance to invest tax-free to support UK business.
Similarly, the deposits from the British Savings Bond will support investment in the UK and provide 'cost-effective financing for the government', as well as making it easier to save for the long term.
However, unlike investments, it's both easy and safe to keep all your savings in the UK – and you’re not restricted to NS&I.
Oxbury Bank is offering the second-best rate on the market at 4.66% and says every pound saved goes to support the rural economy, backing Birtish farmers and the future of British argiculture.
While the biggest banks partly invest abroad, building societies mostly use deposits to lend on UK property. Additionally, because they are owned by their members and not listed on stock exchanges, they don’t pay dividends that could end up going to investors based abroad.
