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NS&I reveal their new British Savings Bond rate – is it worth it?

With NS&I revealing their new savings bond, we look at how the mid-table three-year fixed rate fits into the rest of the market and how to find the best rates.
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Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

National Savings and Investments (NS&I)’s new British Savings Bonds went on sale this month.

But they’re offering rates up to just 4.15% AER over three years, which could doom them to mid-table mediocrity.

This isn’t an accident. From the start, NS&I said they were designed to be middle of the pack, so they wouldn’t attract vast swathes of cash, and would stick around for longer.

For savers, however, this will be disappointing, especially after the fanfare in the 2024 Spring Budget. Given they’re so far behind the market leaders, these bonds risk disappearing without a whimper.

This article isn’t personal advice. If you’re not sure what’s right for your circumstances, seek advice.

Sign up for Monday Money Matters. Get the top stories from HL, including top tax-saving tips and the latest on pensions, savings, annuities and the housing market.

NS&I goes against the tide

NS&I was always going to have to offer something special to get savers excited about three-year savings deals.

Easy-access savings are dominating the market, where savers can make more than 5% without needing to tie their cash up for longer.

Within HL’s Active Savings, three-year deals currently make up less than two percent of client savings instructions. Right now, it seems savers are preferring easy access and competitive shorter fixes.

But the NS&I rates just aren’t special enough to persuade crowds of savers to tie their money up for longer.

How to find better rates for your cash

Easy-access and short-term fixed accounts offer higher rates right now, because longer fixes factor in expectations that interest rates will fall during the term length.

There are still three-year savings accounts on the market paying 4.65% or more.

And you can get Cash ISAs over three years paying more than these NS&I bonds – with the added attraction of protecting your interest from tax.

Bear in mind, tax rules for ISAs can change and their benefits depend on your personal circumstances.

The fact you can hold up to £1mn at NS&I will appeal to those with huge savings balances – and they’re 100% guaranteed by the Treasury.

This lets savers hold it all in one place without having to worry about the £85,000 Financial Services Compensation Scheme (FSCS) protection limit with any institution.

But there are other options for this group.

They could use a savings platform, like Active Savings, to spread larger sums across different banks, all through one online account.

The platform acts like a portal to multiple banks. The rates are better than those you’d find on the high street. It’s also easy to switch between different banks and rates.

And you can spread money across fixed rates from a few months to five years, in whatever way suits you.

It also means your money can be protected by a different £85,000 FSCS limit per banking licence.

Products can be added or withdrawn at any time, so check our website for the latest. Remember, you can’t withdraw money from a fixed-term product until it matures. Inflation reduces the future spending power of money.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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Written by
Sarah Coles
Sarah Coles
Head of Personal Finance

Sarah provides insight and analysis to the media on topics such as savings and financial planning, and co-presents HL's ‘Switch Your Money On' podcast.

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Article history
Published: 23rd April 2024