NS&I: National Savings and Investments' one-year bonds offer high rates – are there prizes like Premium Bonds?

• NS&I has increased its one-year British Savings Bond rate to 4.18% AER
• Bonds offer guaranteed interest but no prize draws like Premium Bonds
• Money is fully protected by the government up to £1 million per person
• Rates remain lower than some top fixed-rate bonds on the market
• Ideal for savers seeking safety and steady returns without risk

While Premium Bonds give savers the thrill of monthly prize draws, NS&I's latest savings product offers something simpler: certainty.

The government-backed savings provider has just relaunched its one-year British Savings Bonds – available as either Guaranteed Growth or Guaranteed Income Bonds – with a better interest rate of 4.18% AER.

Bonds are a type of savings product where you lend money to a government or company for a set period of time, and in return, they agree to pay you interest. At the end of the term, you get your original money back.

That’s a small increase from the previous 4.05%, and it comes as many other savings providers are starting to lower their fixed-rate offers. So, are these bonds a hidden gem – or are there better ways to grow your money?

Can you win prizes with one-year British Savings Bonds?

Unlike NS&I’s flagship Premium Bonds, where you could win up to £1 million in monthly tax-free prizes but earn no interest, these new one-year bonds offer guaranteed returns – but no chance of a prize windfall.

They're ideal for those who want stability over surprise, particularly as the wider market anticipates further base rate cuts by the Bank of England later this year.

“NS&I has bucked the trend in a falling market,” says Sarah Coles, head of personal finance at Hargreaves Lansdown. “Elsewhere, rates are dropping – so this small bump stands out.”

So if you're after thrills and tax-free prizes, Premium Bonds are still the place to dream big. But if steady growth with zero risk is more your style, NS&I’s new bonds might be the safe harbour you’re looking for.

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Are one-year British Savings Bonds worth it?

Bonds are a way to save money by locking it away for a set period. You lend your money to a government or company, and in return, they pay you interest. When the term ends, you get your money back.

With NS&I’s bonds, your money is locked away for a fixed time, and you earn a guaranteed return.

The one-year British Savings Bonds are available as either Guaranteed Growth - where interest is paid at the end of the one-year term - or Guaranteed Income Bonds, where interest is paid monthly into your bank account.

At 4.18%, the new one-year rate still lags behind top-paying fixed-rate bonds on the market, which can offer upwards of 4.5% AER. But NS&I has one trump card: 100% Treasury-backed protection.

That means your money is fully safe up to £1 million per person - you’ll need to invest a minimum of £500 - far above the £85,000 cap offered by most banks under the FSCS.

“For some savers, that government-backing is the main draw,” says Laura Suter of AJ Bell. “It removes the hassle of spreading money across banks.”

NS&I’s move is seen as a tactical one – an attempt to keep existing customers on board as their previous bonds mature, while drawing in new savers with its trademark security. But it’s unlikely to spark a stampede.

The current offer is a far cry from the 6.2% rates available on similar NS&I bonds just two years ago – a figure described by Suter as “a relic from another era.”

If you're after peace of mind and don’t want to shop around or worry about FSCS limits, these bonds might tick your boxes. But if maximising returns is your priority – and you're willing to accept a bit more risk – better rates are still out there.

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