NS&I British Savings Bond 2024: rate, term, best alternatives

The much-anticipated NS&I British Saving Bond has finally hit the market, with analysts expressing disappointment at the 4.15% rate.

NS&I has announced the official launch of its three-year British Savings Bond – but analysts have been quick to criticise the rate on offer.

The Bond, which was first announced by Chancellor Jeremy Hunt in last month's Budget, is available in two forms: a Guaranteed Income Bond that pays out interest monthly and a Guaranteed Growth Bond that pays out interest at maturity. 

The bonds will pay a rate of 4.15% AER and are available to purchase online at nsandi.com.

Bim Afolami, Economic Secretary to the Treasury, said the bond would "help to grow the savings culture in the UK", but critics have been quick to point out that the rate lags far behind the best rival accounts on the market.

As a result, Sarah Coles, head of personal finance at Hargreaves Lansdown, believes the bonds are unlikely to attract huge numbers of savers.

“NS&I British Savings Bonds may well be doomed to mid-table mediocrity," she said, adding that the rate was "disappointing, especially after the fanfare in the Budget, because it’s so far behind the market leaders."

Best British Bond alternatives 

Analysis by investing firm AJ Bell found that there are currently 27 savings providers offering three-year bonds with higher interest rates.

The top rate currently available over that term is 4.67% from Zenith Bank UK, while Oxbury offers a marginally lower rate of 4.66%.

Assuming you had £10,000 to set aside, you would miss out on £177 worth of interest over the term by opting for the British Bond compared to the Zenith Bank alternative.

Savings interest on British Bonds vs best alternatives

As an aside, if the three-year term isn't important to you, it's possible to earn as much as 5.25% on your savings by locking it away for one year with the likes of Secure Trust Bank.

What makes the new bond 'British'?

Another interesting aspect to emerge from today's launch is how the NS&I British Bond will be invested. 

Despite having the word 'British' in the title, it turns out any funds raised from the bond will simply be invested alongside those from all other NS&I products.

As NS&I chief executive, Dax Harkins, notes: “As with all savings with NS&I, money is invested back into supporting the UK through Government financing.” 

That's important for those who might have been tempted to deposit funds in the hopes of backing especially patriotic causes.  

Laura Suter, director of personal finance at AJ Bell, described the bond name as a "fancy bit or marketing".

She explains: “The chancellor announced the launch of the new savings bonds in the Spring Budget, hoping to capitalise on some patriotism across the nation to raise some more money for the Government.

"However, the bonds are a fancy bit of marketing and aren’t actually any different to putting your money in other NS&I products.

"Despite being branded as ‘British Savings Bonds’ the money will go into the general Government coffers, in the same way as other money raised by NS&I."

Why the Bonds might still appeal to some savers

While we've pointed out some of the downsides to the British Savings Bond, it's important to remember the big selling point: any money saved with NS&I is 100% backed by the Government. 

Compare that to traditional financial institutions, which only guarantee a maximum of £85,000 in the event of them going bust.

This additional security could prove especially attractive to the small number of savers who want to set aside a large sum of money – the British Savings Bond lets you save up to £1 million  – but don't want to split their funds across a number of accounts. 

For the vast majority of savers, however, the prospect of earning a better rate with one of NS&I's rivals will likely be the deciding factor.