So, how do government-backed British Savings Bonds compare against other savings accounts in the market?
What are the British Savings Bonds?
British Savings Bonds are NS&I's fixed-rate savings accounts which are backed by HM Treasury, and your savings will be invested back into supporting the UK. They are available as:
- Guaranteed Growth Bonds: where interest builds up and is paid out with your capital at the end of the term.
- Guaranteed Income Bonds: where interest is paid out monthly into your bank account.
Key Features of British Savings Bonds:
- Available terms: 1, 2, 3, or 5 years.
- Rates (AER): 4.05% (1yr), 4.00% (2yr), 4.10% (3yr), 4.06% (5yr). (Income Bonds have slightly lower gross rates due to their monthly payout).
- Investment: £500 minimum, £1 million maximum per person, per issue.
- Access: None. Your cash is locked away for the full term agreed at outset.
- Tax: Interest is taxable and counts towards your Personal Savings Allowance (PSA). However, be careful with Growth Bonds as all the interest is taxed in the year the bond matures, which could push you over your PSA.
- Security: Unlike ordinary savings products with regulated banks, NS&I products are backed by the Treasury meaning that your money is 100% safe.
Are British Savings Bonds worth it?
While the new NS&I rates are an improvement on previous rates, they still generally lag behind the top fixed-rate bonds from regulated banks and building societies.
NS&I British Savings Bonds vs Top Market Fixed Rates
The top fixed-rate bonds can be found in our regularly updated article - Best Fixed Rate Bonds in the UK.
| Term | NS&I British Savings Bond Rate | Top market rate elsewhere* | Provider of best rate elsewhere* |
| 1 Year | 4.05% | 4.65% | Cynergy Bank |
| 2 Year | 4.00% | 4.58% | Close Brothers |
| 3 Year | 4.10% | 4.56% | Cynergy Bank |
| 5 Year | 4.06% | 4.56% | Secure Trust Bank |
*Market rates indicative mid-April 2025. Check latest best-fixed rate bonds deals.
NS&I British Savings Bonds vs Top Market Fixed Rate Cash ISAs
The interest from British Savings Bonds is taxable. It is possible to get higher fixed-term cash ISA rates in the wider market which means all interest earned would be tax-free.
| Term | NS&I British Savings Bond Rate | Top market rate elsewhere* | Provider of best rate elsewhere* |
| 1 Year | 4.05% | 4.55% | Cynergy Bank |
| 2 Year | 4.00% | 4.44% | Close Brothers |
| 3 Year | 4.10% | 4.43% | Cynergy Bank |
| 5 Year | 4.06% | 4.30% | Secure Trust Bank |
*Market rates indicative mid-April 2025. Check latest best fixed-rate cash ISA deals.
It means that by putting your savings into a market leading account, rather than the equivalent British Savings Bonds, you could earn a higher amount of interest. For example, saving £25,000 in the top 1-year market bond could earn you around £150 more interest than the NS&I equivalent over the year before tax.
When would you consider NS&I British Savings Bonds at all?
If you have savings over the £120,000 FSCS limit, NS&I's 100% Treasury guarantee offers complete peace of mind for your entire deposit. The FSCS covers money held in regulated UK current accounts, savings accounts and credit unions. This means that if your bank, building society or credit union goes bust the money held in your account up to the value of £120,000 per person will be covered. If you hold a joint account this limit is per individual and will therefore be up to the combined value of £240,000. Any money over the £120,000 limit per individual will not be covered so you may wish to consider holding money over this amount with separate banking institutions. Money held in a bank, building society or credit union will be automatically compensated if the regulated provider goes bust. By contrast any money held with NS&I is 100% protected so investors seeking security for large sums of money may be happy to forego the higher interest rates on offer elsewhere.
Alternatively if you are particularly keen for your money to be used to supporting the UK, while it is locked away, then British Savings Bonds may be for you.
What about Premium Bonds?
Premium Bonds don't pay interest. Instead, your bonds enter a monthly prize draw for tax-free prizes ranging from £25 to £1 million.
Key Features (April 2025):
- Prize Fund Rate: 3.80% (variable). This was cut from 4%.
- Odds: 22,000 to 1 per £1 bond (variable).
- Investment: £25 minimum, £50,000 maximum.
- Access: Easy access – cash in anytime.
- Tax: All prizes are 100% tax-free.
Important: The 3.80% rate isn't what you'll earn. It's an average payout across all prizes. Most people win nothing or only small amounts, meaning their actual return is often much lower. Think of it as saving with a lottery ticket attached.
British Savings Bonds vs Premium Bonds
| Feature | British Savings Bonds | Premium Bonds |
| Return | Guaranteed fixed interest | Chance to win prizes |
| Certainty | 100% certain return | 0% certain return |
| Tax Status | Taxable | Tax-Free |
| Access | None during term | Easy Access |
| Max Holding | £1m per issue | £50k total |
| Best For | Guaranteed return, security | Tax-free potential, access |
Summary
British Savings Bonds are still mainly attractive to savers who have over £120,000 and prioritise absolute safety above getting the very best rate and tax-efficiency. The rates aren't market-leading, and your money is locked up and any interest is taxable. But if you are patriotic and keen for your money to be used to support the UK while you earn interest then British Savings Bonds may be for you.
With regard to Premium Bonds, they are most attractive to higher-rate taxpayers who've already used their ISA allowance and Personal Savings Allowance and want easy access with a chance of tax-free wins. But for guaranteed returns, especially tax-free ones, top easy-access Cash ISAs usually beat the possible return from Premium Bonds. With the prize rate now at 3.80%, even top easy-access taxable accounts might offer better returns for many, depending on their tax situation.
£200 Pension Cashback Offer
Make a qualifying deposit or transfer a pension to our partner Interactive Investor.
- Deposit or transfer a pension of at least £20k and you could earn £200 cashback
- Terms and Fees apply, Capital at risk
- New & Existing customers opening a SIPP
- Offer ends 30th June 2026
Before starting your transfer, check you won't lose any valuable benefits (such as guaranteed annuity rates or a lower protected pension age) and find out what exit fees you might have to pay
