Savers across the UK were met with disappointing news on Tuesday as National Savings and Investments (NS&I) launched new fixed-term bonds with significantly reduced interest rates.
Rate Cuts Across All Terms
The government-backed savings provider confirmed that new issues of its 1, 2, 3, and 5-year British Savings Bonds went on sale from January 6, 2026. The products, available as Guaranteed Growth Bonds (GGB) and Guaranteed Income Bonds (GIB), now come with lower returns compared to previous offerings.
NS&I stated the changes were necessary to reflect shifts in the wider market and to help the organisation meet its Net Financing target. A spokesperson explained the move was needed to "balance the interests of savers, taxpayers and the broader financial services sector."
New Interest Rates in Detail
The revised rates apply to both Growth and Income options. For the Growth Bonds, the annual equivalent rate (AER) is now 4.07% for 1 year, falling to 3.98% for 2 years, before a slight rise to 4.02% for 3 years and 4.05% for 5 years.
The Income Bonds, which pay interest monthly, have slightly lower gross rates but the same AER. The new rates are as follows:
- 1-year: Income option pays 4.00% gross / 4.07% AER.
- 2-year: Income option pays 3.91% gross / 3.98% AER.
- 3-year: Income option pays 3.95% gross / 4.02% AER.
- 5-year: Income option pays 3.98% gross / 4.05% AER.
Key Features and Limitations
These British Savings Bonds are designed for savers seeking a guaranteed return over a fixed period. The key terms remain unchanged: a minimum investment of £500 is required, with a maximum of £1 million per person per issue.
Funds cannot be withdrawn early, locking savers in for the full 1, 2, 3, or 5-year term. Once the bond matures, customers can choose to withdraw their capital and interest or reinvest into a new term.
NS&I confirmed that existing bondholders who have already received their 30-day maturity letter will receive the interest rate quoted in that communication, unaffected by this new issue.
This announcement places NS&I's offerings in direct competition with high street banks and other savings platforms, with the rate cuts likely to prompt savers to shop around for the best possible return in a fluctuating market.
