NS&I has today announced significant cuts to its British Savings Bonds rates.
The new Issues offer substantially lower returns for both two-year and three-year options.
The Government-backed savings provider has reduced its two-year Guaranteed Growth Bonds to 3.60 per cent gross/AER.
This is down from 4.10 per cent, while the Income option now offers 3.54 per cent gross.
The three-year bonds have seen similar reductions, with Growth bonds dropping to 3.50 per cent gross/AER from four per cent, and Income bonds now paying 3.44 per cent gross.
Despite the rate reduction, NS&I will maintain the Premium Bonds winning odds at 22,000 to one
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These changes, effective from today, December 3, 2024, reflect broader shifts in the UK savings market, impacting millions of savers who rely on NS&I’s products for their financial planning.
The rate reductions represent a significant shift from NS&I’s previous offerings launched just weeks ago.
For 2-year bonds, the 0.50 percentage point drop from 4.10 per cent to 3.60 per cent on Growth bonds marks one of the steepest declines.
Similarly, 2-year Income bonds have fallen from 4.02 per cent to 3.54 per cent, representing a comparable reduction in returns.
The three-year options, which were last updated in September, have also seen substantial cuts, with Growth bonds declining by half a percentage point from four per cent to 3.50 per cent.
The Income version of the three -year bonds has dropped from 3.93 per cent to 3.44 per cent, continuing the pattern of reduced rates across NS&I’s fixed-term portfolio.
This latest round of rate cuts comes ahead of NS&I’s previously announced reduction in Premium Bonds prize fund rate to 4% from January.
The Premium Bonds changes will affect 24 million holders across the UK.
Financial experts have noted that NS&I has, “joined the troops of other savings providers cutting interest rates, as the savings market cools after a bonanza couple of years.”
The January 2025 Premium Bonds draw is expected to feature over £431 million in prizes, with rewards ranging from two £1 million prizes to over 1.8 million £25 prizes.
Despite the rate reduction, NS&I will maintain the Premium Bonds winning odds at 22,000 to one.
Experts warn that NS&I’s rates are now “significantly below the top rates in the market, meaning savers are paying a decent premium for the safety and brand name of NS&I.”
All NS&I products offer complete capital security, backed by HM Treasury, providing savers with peace of mind during uncertain economic times.
As part of the latest changes, the provider has also withdrawn its five-year British Savings Bonds options from sale to new customers.
However, existing customers with maturing fixed-term Issues will still have access to the five-year bonds.