National Savings and Investments (NS&I) has cut interest rates on its British Savings Bonds just two months after increasing them, dealing a setback to savers who had welcomed the higher returns announced in November.
The Treasury-backed savings provider said the decision reflected “changes in the wider market” following the Bank of England’s December base rate cut from four per cent to 3.75 per cent.
The reduction reverses November’s increase, which had gone against broader trends in the savings market at the time.
NS&I said adjusting its rates would help it meet its net financing target while balancing the interests of savers, taxpayers and the wider financial services sector.
The organisation currently serves more than 24 million customers and offers full capital protection, due to it being backed by the Treasury.
Under the new issue, one-year British Savings Bonds now pay 4.07 per cent AER, down from 4.20 per cent AER.
Two-year fixed-term bonds have fallen to 3.98 per cent AER from the previous rate of 4.10 per cent AER.
Rates on three-year bonds have dropped from 4.16 per cent AER to 4.02 per cent AER.
Five-year bonds have also been reduced, falling from 4.15 per cent AER to 4.05 per cent AER.
British Savings Bonds are fixed-term versions of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds and are available across one, two, three and five-year terms.
Customers must invest a minimum of £500, with a maximum holding of £1million per person for each issue.
NS&I has cut rates on its British Savings Bonds just two months after raising them, disappointing savers who welcomed November’s increase
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Early withdrawals are not allowed, meaning savers must commit their money for the full length of the chosen term.
The bonds are available to both new customers and existing bondholders whose investments are reaching maturity.
NS&I said customers who have already received their 30-day maturity notice will continue to receive the rate quoted in that letter.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “If you blinked, you’ll have missed higher NS&I bond rates, because just two months after they were boosted, they’ve been trimmed back again.”
She said the move was not unexpected given seasonal patterns in the savings market, and that autumn and winter typically see large volumes of fixed-rate savings accounts mature, increasing the risk that customers withdraw their money altogether.
Autumn and winter typically see large volumes of fixed-rate savings accounts mature
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NS&IMs Coles said: “That was definitely a theme in September, when money was flowing out of NS&I.”
She added that the temporary increase in November may have been designed to slow those outflows.
“There was actually a significant rise in savings in November, when £2.45billion was paid into NS&I, so now those higher fixed rates have done the job, cuts were in order.”
She noted that although rates have now been reduced, they remain higher than they were before November’s increase.
“However, the bad news is that they fall short of the most competitive deals in the market.”
The fixed-rate savings market has remained relatively robust despite Bank of England rate cuts
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GETTYMs Coles added that this resilience is partly due to expectations that further base rate reductions in 2026 will be limited.
“You can still get 4.45 per cent on a one-year bond, 4.16 per cent over two years, 4.21 per cent over three years and 4.31 per cent over five years.”
She advises savers to compare options carefully before locking their money away.
“It means you can get a better deal from some of the online banks and savings platforms, so it’s important to check what’s on offer before you tie your money up.”