Premium Bonds: NS&I launches new two- and five-year savings bonds with rate increase for 3-year bonds

• NS&I has launched new two-year and five-year British Savings Bonds
• The interest rate on the existing three-year British Savings Bonds has also been increased
• Backed by the Treasury, NS&I guarantees 100% security on all its products
• It is the first time in 15 years that two-year and five-year fixed-term bonds have been available for new investments
• The introduction of these bonds coincides with the Bank of England’s recent base rate reduction from 5.25% to 5%
• Financial experts note the timing as a strategic response to expected declines in easy access savings rates

NS&I has introduced new two-year and five-year British Savings Bonds, expanding the options for savers seeking guaranteed fixed rates.

The savings provider is also raising the interest rate on its current three-year fixed-term British Savings Bonds.

Backed by the Treasury, NS&I guarantees 100% security on its products. It marks the first time in 15 years that two-year and five-year fixed-term bonds have been available for new investments.

The announcement came in the wake of the Bank of England’s reduction in the base rate from 5.25% to 5% at the start of August, with some financial experts warning that savers might see rates decline further in the near future.

It also comes after the recent release of NS&I’s annual report and accounts, which showed that it overshot its target for net financing to the Government in 2023/24.

British Savings Bonds are fixed-term issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.

The two and five-year fixed-rate Guaranteed Growth Bonds and Guaranteed Income Bonds were last on general sale to new investments in October 2009.

The two-year option offers savers 4.60% AER (annual equivalent rate). Savers investing in the five-year option will receive 4.10% AER.

The interest rate on the existing three-year British Savings Bonds increased for new investors from Tuesday 6 August, offering 4.35% AER, up from 4.15% AER previously.

NS&I chief executive, Dax Harkins, said: “It is 15 years since we last had two and five-year fixed-term bonds on general sale to new investments.

“The two new issues, along with a rate increase for our three-year bonds, provide NS&I savers with increased choice and longer-term security in a changing market.”

The two, three and five-year fixed-rate Growth and Income Bonds are open to savers wishing to fix at a guaranteed rate for the whole term.

Savers need a minimum investment of £500 and can invest a maximum of £1 million in each issue. After the fixed-term period, savers will have the choice to withdraw their cash or reinvest into a new term.

When customers invest in NS&I products, they are lending to the Government. In return, the Government pays interest or prizes for Premium Bonds.

Sarah Coles, head of personal finance, Hargreaves Lansdown said NS&I “has stuck with the less busy markets offering fixed rates over two, three and five years”.

“At the same time, while these are decent rates, they’re not going to set the savings world alight…

She said: “If you’re in the market for a new fixed deal, you can get more interest elsewhere.

“They’re likely to do the job though. The timing is clever, because the Bank of England rate cut will have reminded people that in the coming months, we can expect easy access savings rates to fall.

“These new accounts may appeal to anyone who still hasn’t got round to fixing at least some of their savings while rates remain higher. And because they allow investments of up to £1 million – 100% protected by the Treasury – it will appeal to some of those with larger balances.”

Are you considering investing in these new offerings, or do you have other strategies in mind for managing your savings in the current economic climate? Share your insights and experiences in the comments section.