NS&I bonds now pay up to 5.17%: rates, tax and the fixed-term catch

NS&I raised the rates on its fixed-term British Savings Bonds on 6 October 2026, with its five-year Guaranteed Growth Bond paying 5.17% gross/AER. Higher rates have created renewed interest among UK savers, but the highest headline figure comes with an important limitation: the money is locked away for the selected term. The difference between monthly-income and growth versions, possible income tax and availability of better competing offers can all alter the best choice. This guide uses the provider's published October rate table and focuses on the practical questions a saver should answer before committing.

What changed in October 2026?

National Savings and Investments announced new issues of its British Savings Bonds on 6 October 2026, increasing rates across one-, two-, three- and five-year terms. Both Guaranteed Growth Bonds and Guaranteed Income Bonds are offered, with different ways of receiving interest. The headline maximum is 5.17% AER for a five-year option, but that does not mean every account pays 5.17% or that all savings stay accessible. The quoted rates applied to the issues offered from 6 October and may change for later purchases. Check the live NS&I rate table before depositing.

What are the new Guaranteed Growth Bond rates?

The official October table lists 4.99% gross/AER for one year, Issue 93; 5.07% for two years, Issue 81; 5.10% for three years, Issue 83; and 5.17% for five years, Issue 75. These figures are annual equivalent rates rather than a promise to pay the full percentage every month. A longer term does not necessarily provide the best overall result for every saver, because money is inaccessible during the period and future interest rates could move either way. Choose the term based on when the savings will actually be needed.

How do Guaranteed Income Bonds differ?

Income Bonds in the British Savings Bonds range pay interest monthly instead of holding it within the bond for growth. Their October gross rates are 4.88% for one year, 4.96% for two, 4.99% for three and 5.06% for five. The respective annual equivalent rates are 4.99%, 5.07%, 5.10% and 5.17%. This distinction matters: a cash payment withdrawn each month does not have the same compounding experience as interest retained or reinvested. People who need predictable monthly income may prefer that structure, while long-term savers may favour growth.

What do gross rate and AER mean?

AER stands for annual equivalent rate and provides a basis for comparing interest rates after allowing for how often interest is credited and compounded. Gross is the rate before any applicable tax. For an income bond paying monthly, the gross rate can be lower than its stated AER even if the product has an equivalent annual yield for comparison. A saver who spends each monthly payment cannot assume the capital automatically grows at the advertised AER. Always read whether the rate is fixed and how the product calculates or pays the interest.

How much can you deposit?

The current NS&I product information gives a minimum investment of £500 and a maximum of £1 million per person per issue, subject to eligibility and product rules. That wide range distinguishes these savings products from accounts with smaller caps. The amount you choose should leave sufficient cash for rent, bills, emergencies or near-term spending. Depositing every available pound in a five-year bond could cause serious difficulties if an unexpected expense occurs. Check how jointly held products are treated, including each person's allocation and the account's terms.

Can money be withdrawn before maturity?

A crucial disadvantage is that fixed-term British Savings Bonds generally do not permit early encashment during the term. Money placed into a five-year product may therefore be tied up for five years. The rate can be attractive precisely because the saver gives up flexibility. Do not treat these products like easy-access savings accounts. Read the terms carefully before applying, especially if the money may be needed for a house deposit, business expenses or major repairs. Hold a separate emergency buffer that can be accessed without waiting years for the bond to mature.

Is the money government-backed?

NS&I is backed by HM Treasury and markets its savings products as offering 100% capital security. That is different from ordinary bank or building-society accounts, where the Financial Services Compensation Scheme provides protection subject to limits and eligibility. The current general FSCS deposit limit is £120,000 per eligible person per authorised institution. A government guarantee does not eliminate inflation risk or make an illiquid savings bond appropriate for everyone. It addresses the credit safety of the deposit, not the possibility that prices rise faster than its fixed interest.

How do tax rules affect the real return?

Interest on these British Savings Bonds is normally taxable according to the individual's circumstances, whereas Premium Bonds prizes are tax-free. Depending on total savings income, income-tax band and allowances, a portion may fall within the Personal Savings Allowance. Tax treatment can also depend on when interest arises and when it is paid or credited. Someone comparing a fixed bond with an ISA should compare returns after tax rather than headline percentages alone. NS&I's product information and HMRC guidance are the proper starting points for questions about personal tax liability.

Are these the same as Premium Bonds?

No. Premium Bonds do not pay guaranteed interest; eligible holdings are entered into monthly prize draws, and any prize is a matter of chance. British Savings Bonds pay a specified fixed interest rate under their terms. A published Premium Bonds prize-fund rate does not mean each holder earns that rate. Consumers often confuse the two because NS&I offers both. Before depositing, decide whether predictable interest or a prize-draw product fits the savings goal. The names are similar, but the experience and risks are materially different.

Do the higher rates mean they are the best deals?

NS&I has become more competitive following the October increases, yet some banks and building societies may offer higher headline interest on comparable fixed terms. Other providers can differ in minimum balance, maximum deposit, interest timing, eligibility and protection arrangements. A one-year offer with a better AER may be unsuitable if it closes before the saver is ready; conversely, locking into five years can be costly if future rates rise. Compare the full product terms and current market offers rather than choosing automatically from a single ranking table.

What happens when the fixed term ends?

NS&I states that customers with a maturing British Savings Bond are able to withdraw or reinvest when the agreed term has ended. The interest rate available for renewal may differ from the one offered today. A maturing saver should review any NS&I notice before the deadline and understand the default treatment if no instructions are given. Do not assume that today's 5.17% continues for another five years automatically. Keep contact details up to date so maturity notices reach the correct address, and beware of phishing messages claiming an urgent renewal is required.

Who might consider Growth rather than Income?

Someone saving for an expenditure that is comfortably more than a year away and who does not need regular cash payouts may prefer a growth structure. A retiree or household wanting a defined monthly supplement may look at income payments. The correct choice depends on when money is needed, existing emergency reserves and tax circumstances. Neither structure guarantees that its real purchasing power will rise. Use your own cash-flow needs and an up-to-date comparison rather than copying another person's preference on social media or a forum.

What should savers verify before applying?

Confirm the current issue number, the rate, the minimum and maximum deposit and whether early withdrawals are permitted. Check the product's tax treatment, eligibility and maturity instructions. Use the official NS&I website rather than a search advertisement promising an enhanced 'special rate'. A legitimate guarantee should never require sending a password or one-time code to an unknown person. If an offer is materially higher than the official product table, treat it as potentially fraudulent and contact NS&I through a channel you have independently verified.

Frequently asked questions

Does every NS&I account pay 5.17%? No, the rate relates to certain five-year British Savings Bonds. Is 5.17% tax-free? No, these bonds are taxable savings products. Can I take money out after six months? Fixed-term withdrawal restrictions generally prevent that. Are Premium Bonds the same thing? No, Premium Bonds use prize draws. Are the rates guaranteed forever? They are fixed for the selected term, not for future renewals. Is the £500 minimum guaranteed for all future issues? Check the current product terms before buying.