NS&I has boosted the rates of its British Savings Bonds to up to 4.2% AER and has launched new issues of one, two, three and five year fixed-rate bonds.

British Savings Bonds are fixed-term Issues of NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “NS&I has pulled out all the stops and made fairly chunky increases across the board. This flies in the face of cuts elsewhere in the market, so it’s clearly a major effort to raise funds.

She added: “You can still do better elsewhere though. The rises aren’t enough to get any of these deals into the top ten accounts across any period.”

Andrew Westhead, NS&I retail director, said: "I’m pleased that we can offer increased interest rates on these fixed-term products, giving savers who want guaranteed returns a choice in how they invest, while continuing to benefit from the security of the 100% government guarantee.

“Today’s changes ensure we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

The interest rate on the 1-year Growth option has climbed to 4.2% gross/AER from 4.04%. The rate on the Income option has been increased to 4.13% gross/4.2% AER from 3.97% gross.

There have been similar increases in the growth and income bonds over two, three and five years, as the table below shows.

Source: NS&I

Guaranteed Growth Bonds and Guaranteed Income Bonds are available to customers wanting a guaranteed rate for a fixed-term of 1, 2, 3 or 5 years.

Funds cannot be withdrawn early with fixed-term accounts. Savers will need a minimum investment of £500 and can invest a maximum of £1m per person in each Issue. After the fixed-term period, savers will have the choice to withdraw their cash or reinvest into a new term.