# NS&I chops British Savings Bonds rates

By Charlene Young — 2026-01-06

Charlene Young, senior pensions and savings expert at AJ Bell, said: “Hot on the heels of the latest Bank of England base rate cut, the government savings provider NS&I has slashed rates on new issues of its popular Guaranteed Growth and Income bonds across the board.

“Despite the interest rate cuts, the fact that these accounts are government-backed means many savers have huge brand loyalty to NS&I.

“But those worried about protection offered for cash savings should keep in mind that customers with bank accounts in the UK now enjoy greater protection under the Financial Services Compensation Scheme (FSCS).

“The limit for deposit takers, like banks, building societies, and credit unions went up on December 1 2025 from £85,000 to £120,000 per banking licence.

“Savers should remain alert to the changes in the savings market and explore the best rates where they can.

“The best available two-year fix elsewhere on the market will currently pay around 4.15 per cent AER, some 17 basis points higher than NS&I.

“The gap is even higher when you extend the term to five years, where the best rate will pay around 4.3 per cent, versus the new 4.05 per cent AER on offer from NS&I.

“They also need to watch out to avoid an unexpected tax bill with these accounts.

“While Premium Bonds from NS&I are tax-free, British Savings Bonds are not, meaning you may owe tax on the interest if you exceed your Personal Savings Allowance.

“With the growth version of the bond, all the interest is taxed when it’s paid out at the end of the term, which could push you over your tax-free allowance.”

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