NS&I cuts extra financial savings charges with new points of those two and three yr fixes

National Savings and Investments has launched new issues of its fixed-rate savings accounts.

From today, savers will be able to open two-year British Savings Bonds paying a rate of 3.6 per cent if they opt for interest paid annually or monthly. 

NS&I has also launched a new three-year version of the bonds paying 3.5 per cent if interest is paid annually or 3.49 per cent if savers take the monthly income version.

The rates are lower than those previously offered for the same fixed-rate terms, which paid 4.1 per cent for the two-year version and 4 per cent for the three-year version.

NS&I said that the lower rates reflect ‘changes in the wider market’ and that the new rates will ‘help NS&I to meet its net financing target’.

The Treasury-backed bank has a net financing target for 2024/25 of £9billion, with wiggle room of plus or minus £4billion.

New launches: NS&I has launched new issues of its two and three-year fixed rate bonds but with lower rates

Sarah Coles, head of personal finance at stockbroker Hargreaves Lansdown said the move is a sign ‘NS&I may have filled its coffers.’

NS&I also announced that the five-year version of the bonds, paying 3.9 per cent are no longer on sale to new customers.

British Savings Bonds are fixed-term versions of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds which were announced by the previous Government in March 2024.

NS&I launched new issues of its two and five-year fixed-rate bonds in August for the first time in 15 years. Back then the two year-bond was paying 4.5 per cent and the five-year version paid 4.1 per cent. 

It paints a bleak picture for NS&I customers who have faced two cuts to the Premium Bonds prize fund in two months as well as cuts to NS&I’s Direct Saver and Income Bonds. 

How good are the new NS&I fixed rates?

The new bonds do not offer as much interest as the market-leading savings accounts in the This is Money independent tables. 

Savers can find two and three-year fixed rate bonds paying 4.6 per cent from Atom Bank. 

A saver putting £10,000 into NS&I’s two-year bond would have £10,745 by the end of the term, This is Money’s savings calculator shows. 

While a saver putting £10,000 into NS&I’s three-year bond would have £11,105 by the end. 

By comparison If a saver were to put £10,000 into the best buy over two-years at 4.6 per cent, they would have £10,962 or £11,477 if they locked it away for three years.

British Savings Bonds are open to new savers who pay at least £500 into the bonds as a starting investment. 

The maximum a saver can invest is £1million, fully protected unlike banks which are part of the Financial Services Compensation Scheme that protects up to £85,000 or £170,00 for joint accounts. 

Coles said: ‘The cuts will be a huge disappointment for loyal customers planning to tie their cash up and protect it from future rate cuts. 

‘Savers need to seriously consider whether this is the right home for their cash right now.’

> Best fixed-rate bonds: This is Money’s independent savings tables 

British Savings Bonds are taxable, unlike some NS&I products. This means savers need to be alert to breaching their Personal Savings Allowance.