NS&I interest rates: what you can earn today

What is NS&I?

National Savings & Investments (NS&I) is a government organisation that offers savings accounts to 24 million customers, and it’s existed in one form or another since the 1860s. 

It doesn’t have branches. It doesn’t do mortgages, current accounts or credit cards. Its purpose is simple – to give folks a secure place to save while helping raise money for the government. 

Even though savings rates offered are rarely market-leading, the security guarantee is what gives the NS&I its main value proposition. Every pound you save with NS&I is directly Treasury-backed, with no upper limit. With a normal bank or building society, protection is capped at £120,000  under the Financial Services Compensation Scheme. That added layer of security is the main attraction for savers with money they don’t want to take chances with

What do NS&I offer?

NS&I keeps things fairly straightforward.

There are easy-access savings accounts, where you can move money in and out and earn a variable rate of interest. There are fixed-rate bonds where you agree to lock your money away for a set period in return for a guaranteed rate. There are also income-paying accounts which pay the interest return directly into your bank account each month rather than leaving it to build up. 

And then there are Premium Bonds, which replace interest with a monthly prize draw.

Most savers use one or two of these products alongside other bank accounts elsewhere.

What are the new NS&I interest rates?

At the moment, most of these NS&I products, including Premium Bonds, can be expected to return something in the 3-4% range.

Premium Bond prizes are between £25 and a cool £1mn. However, over time, the average prize “rate” is proportionate to what you deposit and works out at roughly 3.6%. This figure is the mean across millions of bondholders, and it’s skewed by a small number of exceptionally lucky winners. In reality, many people will receive less than that in any given year. But over long periods and large balances, outcomes tend to drift towards this rate.

Easy access savings account stend to sit around 3%, while fixed-term bonds are closer to 4%, depending on the term. Respectable, but not spectacular. 

For higher and additional-rate taxpayers in particular, the Premium Bond prize rate can still compare favourably to these returns. That’s because the prizes are tax free. After a personal savings allowance is used up, the after-tax comparison can look better than what’s offered from NS&I savings accounts and fixed-term bonds.

How do these rates compare with the past?

As the chart below shows, a few years ago during 2023, Premium Bonds reached a prize fund rate of 4.65% and some fixed-term bonds with the longest terms paid over 6%. In contrast, for much of the 2010s, rates were on the floor, hovering close to zero as interest rates were so low.

In the aftermath of the pandemic era stimulus, the Bank of England pushed interest rates higher to tackle inflation. This caused savings rates across the market to jump, and NS&I simply followed the market. Now inflation is back under control and we’re seeing base rate cuts, the industry is cutting rates, and NS&I has simply followed suit.

Why doesn’t the NS&I offer better rates?

If you think you’ve seen higher rates from other banks, it’s probably because you have.

NS&I doesn’t aim to top the best-buy tables. Its role is to stay broadly competitive so that it can raise funds for the government without distorting the savings market or overpaying for funding with too high rates.

If you’re simply looking to get the very best headline rates, it can pay to shop around. Government backing has its place, but maximising return and using tax-efficient wrappers can matter just as much. If you want to compare options, you can explore Charles Stanley’s Cash Savings powered by Bondsmith, which has a broad range of competitive savings accounts from both challenger banks and high street names.

Who are the NS&I bond winners?

Technically, anyone who owns Premium Bonds can be a prize winner. Results are announced at the start of each month.

Every £1 invested in Premium Bonds is an entry into the prize draw. And that’s why, in practice, people with higher balances tend to win more – they simply have more “tickets” in the draw and are therefore more likely to win the larger prizes. 

The real winners from NS&I Premium Bonds are arguably higher-rate taxpayers and additional rate taxpayers. 

Normally, higher rate taxpayers can only earn interest on savings of up to £500 before being taxed at 40%. And additional rate taxpayers don’t get a personal savings allowance at all. With Premium Bonds, there may be no guaranteed interest but any prizes you win are completely tax free. If a higher-rate taxpayer chooses Premium Bonds and isn’t too unlucky, their average return can be similar toa reasonable savings account after accounting for tax.

Once your tax allowances are fully used, it’s worth considering NS&I’s Premium Bonds and compare after-tax returns, not just headline rates. 

When is the next premium bond draw for NS&I?

There’s a new draw at the start of each month. If you want to invest more to increase your chances, it will take a full calendar month until those extra funds qualify, so the wait for the first draw for your new bonds will be between one and two months.

How long does NS&I withdrawal take?

If you want to withdraw from Premium Bonds or an easy-access savings account, NS&I usually pays out within a few working days once you request the funds into your bank account. 

Meanwhile, fixed term bonds are designed for money you can leave alone. Access is limited or not available at all, which is the trade-off for a higher rate.