Are eight savings accounts still worthwhile after NSandI lowered their interest rates?

Customers who want to lock their savings away to grow for a period of one, two, three, or five years will now be offered less appealing interest rates by NS&I

Savers have suffered yet another setback after National Savings and Investments (NS&I) lowered interest rates on new issues of their well-liked fixed-term British Savings Bonds.

Today, the state-owned savings bank announced that new issues of its Guaranteed Growth and Guaranteed Income Bonds, which have terms of one, two, three, and five years, will be offered for sale at interest rates that are 10 to 14 basis points lower than those of their earlier issues.

Only recently issued fixed-term bonds are subject to the cuts. Consumers who invested in earlier NS&Is British Savings Bond issues will continue to receive the interest rate that was originally agreed upon.

Two months have passed since NS&I raised the interest rates on its savings bonds in November.

The head of personal finance at Hargreaves Lansdown, Sarah Coles, stated: "There's always a risk that savers will take their money and leave because more fixed rate accounts mature in the fall and winter. In September, when funds were leaving NS&I, that was undoubtedly a theme.

"There's a good chance that this short-term boost was intended to stop the flow. When £2.45 billion was paid into NS&I in November, there was a notable increase in savings; therefore, cuts were necessary now that the higher fixed rates had completed the task. A "

Regarding their Premium Bonds products, NS&I has not altered any information. After being lowered in August, the annual prize fund rate is still at 3.6%, and the odds of winning are still one in 22,000 per bond.

Interest rates on Guaranteed Growth Bonds have dropped.

Over a predetermined period of time, Guaranteed Growth Bonds pay a fixed rate of interest. Interest is computed daily and added to the bond on each anniversary of the investment. Since interest earned is reinvested, they function similarly to the majority of conventional fixed-term savings accounts.

All new issues of these bonds have seen a 1014 basis point reduction in interest rates.

The interest rates for NS&Is Guaranteed Growth Bonds, both old and new, are displayed in the table below.

NS&I, January 6.

What is the difference between other fixed-term accounts and British Savings Bonds?

The news will disappoint savers seeking a fixed-term deal, but there are still plenty of other competitive options in the fixed-term market.

According to Moneyfacts, the best one-year fixed term savings account from Union Bank of India (UK) pays 4.45 percent interest, whereas an account from Chetwood Bank with the same term will pay 4.26 percent.

NS&I continues to offer an interest rate that is higher than the average for one-year fixed term accounts, even though there are better offers available on the market.

The interest rates on the Guaranteed Growth Bond and the Guaranteed Income Bond are 4.07 percent and 4 percent, respectively, which are 23 and 16 basis points higher than the market average of 3.84 percent.

"The good news is that NS&Is bonds are still offering more than they did before the November bump," stated Coles at Hargreaves Lansdown. The bad news is that they don't match the most competitive offers available. Because the market isn't anticipating many interest rate cuts in 2026, the fixed rate market has fared remarkably well in the face of the Bank of England's rate reductions. A "

Longer-term bonds are still available to savers at better prices than NS&I's. Interest rates for the top three-year, two-year, and five-year fixed accounts are 4.16 percent, 4.21 percent, and 4.31 percent, respectively.

Because NS&I is a government-run savings bank, the money you keep in its products is essentially completely secure because the government guarantees your savings. Your money could only be at risk if the UK government files for bankruptcy, which is extremely unlikely.

In a different article, we list the current best savings rates.

Find Out More About National Investments and Savings.