The UK’s government-backed savings provider NS&I has increased interest rates on several of its fixed-term products, even as returns on Premium Bonds have recently declined. The shift comes at a time when broader savings rates have generally been easing following cuts to the Bank of England base rate.
The update places savers in a position where different NS&I products are moving in opposite directions. Fixed-rate bonds now offer higher guaranteed returns, while Premium Bonds, long popular for their prize-based system, have become slightly less rewarding in recent months.
Fixed-Term Bond Rates Rise Across Multiple Products
NS&I has introduced higher rates on its British Savings Bonds, affecting both Guaranteed Growth and Guaranteed Income options across various terms. According to the provider, the one-year versions of both bonds now offer 4.5 percent, up from 4.07 percent. Two-year bonds have increased to 4.48 percent from 3.98 percent, while three-year products now stand at 4.45 percent, compared with 4.02 percent previously. Five-year bonds have also seen an uplift, reaching 4.4 percent from just over 4 percent.
The changes extend beyond fixed-term products. The rate on NS&I’s postal-only Investment Account has more than doubled, rising from 1 percent to 2.05 percent. According to NS&I, these adjustments reflect broader movements in the savings market and are designed to help meet its net financing target for the 2026–27 financial year.
A spokesperson for the institution said the organization regularly reviews its rates to balance the needs of savers, taxpayers, and the wider financial sector. The increases come despite a general trend of declining rates among other savings providers, linked to recent base rate cuts by the Bank of England.
Premium Bonds Prize Rate Cut and Outlook Remains Uncertain
While fixed-term products have become more competitive, Premium Bonds have moved in the opposite direction. The prize fund rate was reduced from 3.6 percent to 3.3 percent starting with the April draw. At the same time, the odds of winning shifted from 22,000 to one to 23,000 to one.
This adjustment reflects a broader recalibration rather than a direct response to the latest bond rate increases. According to Sarah Coles, head of personal finance at AJ Bell, several factors influence whether the Premium Bonds prize rate changes, including trends in easy-access savings accounts, base rate decisions, and NS&I’s funding needs.
She noted that while top easy-access rates have declined slightly since the last Premium Bonds cut, the movement has not been significant enough on its own to trigger another change. According to Coles, NS&I must strike a balance between offering competitive returns and avoiding excessive costs for taxpayers.
Timing also plays a role. With the financial year still in its early stages, there is no immediate pressure for further adjustments. Coles said NS&I may rely on the improved appeal of its fixed-rate bonds to attract funds, which could reduce the need to revisit Premium Bonds rates in the near term.
Future changes remain possible, depending on how the savings market evolves, whether the Bank of England alters interest rates again, and how successfully NS&I meets its funding targets.
