NS&I has cut the rate on two-year, three-year and five-year British Savings Bonds.
Here’s what’s changed.
NS&I Growth Bond
Term | Previous rate (AER)* | New rate (AER) |
|---|---|---|
2 years | 4.60% | 4.25% |
3 years | 4.35% | 4% |
5 years | 4.10% | 3.90% |
NS&I Income Bond
Term | Previous rate (AER) | New rate (AER) |
|---|---|---|
2 years | 4.50% | 4.17% |
3 years | 4.26% | 3.93% |
5 years | 4.02% | 3.83% |
While savings rates are being cut across the market, this puts NS&I firmly in the uncompetitive end.
With rates dropping, and likely to keep falling, now is the time for savers to look elsewhere to get the best rates.
This article isn’t personal advice. If you’re not sure if an action is right for you, ask for advice.
How safe is your money outside of NS&I?
There will always be savers who stick with NS&I for its Treasury backing – regardless of whether the rate is lower.
However, your savings don’t just lose out on being protected if they’re not with the NS&I.
The Financial Services Compensation Scheme (FSCS) covers you up to £85,000 per banking licence. So, if you have more than £85,000 in savings, you can spread it across different banks and keep everything protected.
Plus, if you save with smaller banks, you’ll have the same protection as saving with a high street giant.
Considering that the rates are usually better at smaller banks, this is another reason to look around.
How to easily spread money across different banks
Spreading money across different banks has its benefits. You’ll usually find better rates on a bigger range of terms, and it’s easier to stay protected.
But holding more accounts also means more log ins and more hassle.
Savings platforms, like Active Savings, let you save and pick rates from multiple banks, all through one single online account.
And all of the banking partners have FSCS protection.
So, you can see everything in one place, without keeping all your eggs in one basket.
Plus, the best two, three and five-year fixed rates on Active Savings are currently higher than the NS&I is offering. Please note though rates can be added or withdrawn from Active Savings at any time.
What does this mean for premium bond savers?
The fact NS&I is cutting rates demonstrates that it’s not desperately keen to fill its boots.
Therefore, there’s every chance NS&I could cut its variable rates soon, which could mean the premium bond prize rate gets less generous.
You don’t have to pay UK income tax on premium bond winnings, but you get the same benefit saving in a Cash ISA – and on average you’ll get a higher, more reliable return than you would with premium bonds.
Right now, you can still find Cash ISA rates well above 4%. And if you pick a fixed rate, you can lock in rates while they’re relatively high.
If you decide to put any of your Cash ISA in a fixed term product, you could be charged if you close or transfer your Cash ISA before the term ends. Tax rules can change, and benefits depend on individual circumstances.
Still not sure if you want a variable or fixed-rate Cash ISA?
The HL Cash ISA lets you pick multiple rates from multiple banks, all through one online account.
* AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.
This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). 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