NS&I launches 1-year British Savings Bonds

3 min Read Published: 31 May 2024

NS&I launches one-year British Savings BondsA new batch of 1-year fixed British Savings Bonds are now available to purchase via the NS&I website. Customers can choose from Guaranteed Growth Bonds with an interest rate of 4.50% gross/AER and Guaranteed Income Bonds with an interest rate of 4.41% gross/4.50% AER.

Meanwhile, NS&I has also put up the interest rate on its Direct Saver accounts as well as its Income Bonds accounts. Direct Saver accounts will now yield an interest rate of 4.00% up from 3.65%, while Income Bonds will now earn you a rate of 3.93% up from 3.59%. Neither of these are market-leading rates, with easy access savings accounts elsewhere offering interest rates above 5.00%.

The news comes after NS&I launched its 3-year fixed-rate British Savings Bonds in April following an announcement by the Chancellor of the Exchequer Jeremy Hunt during the Spring Budget. The 3-year fixed-rate bonds are still available to purchase and offer an interest rate of 4.15% AER as long as you're willing to lock your money away for three years.

Neither the 1-year British Savings Bonds nor their 3-year counterparts are market-leading in terms of interest rates. There are better deals to be had on the market right now. However, they may be right for some savers.

One of the key benefits that NS&I products offer is the fact that they're fully backed by HM Treasury which means your deposits are fully protected. In contrast, most other savings products offer FSCS protection which only protects your deposits up to £85,000. As such, more risk-averse savers could choose to opt for a lower savings rate if it means they are better protected.

We cover the new 1-year British Savings Bonds in more detail below to help you decide if they're right for you.

How do the 1-year British Savings Bonds work?

The 1-year British Savings Bonds work similarly to the 3-year British Savings Bonds. However, as the name suggests, you'll only need to lock your money away for one year rather than three years.

Other than that, the rules around the bonds are the same. Each bond costs £500 and you can invest between £500 to £1,000,000. The interest rate will not change while your bonds are locked away, but you will also not be able to withdraw your funds. You can buy more bonds at a later time, however they will come with a new maturity date (in this case, a year from when you buy them). Also, the interest rate may change in the future, so future bond purchases may offer a different interest rate. This won't affect your existing bonds, however.

There are two ways you can save with British Savings Bonds depending on your needs. You can opt for the Guaranteed Growth Bonds or the Guaranteed Income Bonds. We cover these in more detail below.

1-year fixed Guaranteed Growth Bonds

Guaranteed Growth Bonds work well if you want a savings product that pays out interest at the end of the fixed period. The interest you earn will be calculated daily and added to your bond at the end of the year. Once your bond matures and you're able to access it, you'll need to declare the interest you've earned on it and potentially pay income tax on the interest you've earned above your personal savings allowance. For people on the basic income rate, this is £1,000.

1-year fixed Guaranteed Income Bonds

Guaranteed Income Bonds are designed to pay you a fixed monthly income during the bond term. The interest you earn will be paid out monthly instead of being added to your savings, but you can't access the money you've deposited throughout the 1-year period. You may still be liable for income tax on the interest you earn from these bonds if you have other investments or savings that push you over your personal savings allowance.

How to apply for the new British Savings Bonds

You're likely to be eligible for the British Savings Bonds if:

  • You're at least 16 years old
  • You have at least £500 to invest
  • You want to manage your investment online

You'll need to provide some basic personal information to apply, including your address and date of birth as well as your N&I number if you have one already. On the whole, however, the application can be completed online via the NS&I website and shouldn't take more than 7 to 10 working days to process.

Are the 1-year fixed British Savings Bonds competitive?

The 1-year fixed rate British Savings Bonds are not market-leading when it comes to the interest rates on offer. The top market-leading 1-year fixed rate bonds right now offer interest rates above 5.15% AER.

Current market conditions mean that locking away your money for longer means earning less interest. But even so, many 2-year and 3-year fixed rate bonds offer higher interest rates than what' the British Savings Bonds offer. SmartSave, for example, has a 2-year fixed rate saver with a rate of 4.96%. The Access Bank UK is offering a 3-year fixed rate bond with a rate of 4.80%.

As such, there are better interest rates on offer if you want to lock your money away for longer and earn even more interest. Take a look at our savings tables if you're looking for the best fixed-rate bonds on the market right now. We update these tables frequently so it's worth bookmarking them.