NS&I Guaranteed Growth & Income Bonds return: are they any good?

NS&I has announced the return of two popular one-year fixed-rate savings deals, which will be available to all savers.

The Guaranteed Growth Bond will pay a rate of 4% AER while the Guaranteed Income Bond, which pays interest monthly, will pay 3.97% AER.

It’s the first time these particular one-year bonds have been on sale since 2019, and NS&I says the rates are the highest they’ve been since 2010.

In truth, NS&I has been on something of a rate-hiking spree of late as it seeks to keep pace with the wider savings market.

It has more than doubled the rate of its flagship Premium Bonds since September to a table-topping 3.15%, and hiked a host of its other products to impressive levels as well.

So how do its ‘new’ bonds stack up against the competition?

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Rates are competitive, not market-leading

Both the Income and Growth bonds require a minimum deposit of £500 and allow you to hold up to a whopping £1 million.

After one year, savers will have the choice to withdraw their cash or reinvest.

They’re also taxable, so can be compared to traditional fixed-rate savings accounts offered from private institutions.

At the time of publishing, the best rate you can get on a one-year fix is 4.16% from SmartSave.

However, that particular account comes with far tighter restrictions on deposits, requiring a minimum of £10,000 and a maximum of £85,000.

As you can see from the table below, Atom Bank has a similar account that can be opened from as little as £50, while Secure Trust Bank’s one-year fix allows you to deposit up to £1 million.

So, the NS&I bonds do fall short of the very best accounts currently available.

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NS&I more appealing to those with big savings

If you have a savings pot worth less than £85,000 then one of these alternatives is probably a better bet.

That’s because the Financial Services Compensation Scheme effectively guarantees the security of all funds below that level with any one banking group.

So if the worst were to happen and your bank went under, your funds would be protected.

With that in mind you may as well choose the highest possible rate available to you.

But for those lucky enough to have savings above that level, the NS&I bonds suddenly become far more appealing.

That’s because the state-backed bank effectively secures all funds deposited, right up to the maximum-allowed £1 million.

For such people, it could be worth sacrificing a small amount of rate for the knowledge that their huge pot is safer than it would be elsewhere - assuming they didn't want the hassle of breaking it up into separate £85,000 pots at various banks, of course.

Existing NS&I savers can invest for longer

As part of the product launch, it's worth mentioning that NS&I also hiked the rates on its two-, three- and five-year Guaranteed Growth Bonds as well as its Savings Certificates.

You can see the full breakdown of rates in the table below, which vary between 4.05% and 4.2%.

Sadly, these bonds are only available to existing customers rather than the general public.

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Fixed-term savings products (not on sale but available to customers with maturing products)