National Savings & Investments (NS&I) has released new two and five-year issues of British savings bonds and increased the interest rate on the existing three-year fixed term offering.

British savings bonds are fixed-term Issues of NS&I’s guaranteed growth bonds and guaranteed income bonds.

These bonds are open to savers wishing to fix at a guaranteed rate for the whole term, and savers will need a minimum investment of £500 and can invest a maximum of £1m in each Issue. After the fixed term period, savers have the choice to withdraw their cash or reinvest into a new term.

NS&I, formerly named the Post Office Savings Bank and National Savings, is a state-owned savings bank and is both a non-ministerial government department and an executive agency of the Treasury.

“It is 15 years since we last had two and five-year fixed-term bonds on general sale to new investments,” NS&I chief executive, Dax Harkins, said. “The two new issues, along with a rate increase for our three-year bonds, provide NS&I savers with increased choice and longer-term security in a changing market.

“Today’s changes will help us to meet our net financing target while continuing to balance the interests of savers, taxpayers and the broader financial services sector.”

As part of the new offering, NS&I confirmed the two-year growth option offers savers 4.60% while the income option offers 4.50% gross and 4.60% AER. Savers investing in the five-year growth option will receive 4.10% while this income option offers 4.02% gross and 4.10% AER.

The interest rate on the existing three-year British savings bonds is also increasing for new investors and offers savers 4.35%, with the income option offering 4.26% gross and 4.35% AER.

Commenting on the state-owned savings bank’s announcement, director of personal finance at AJ Bell, Laura Suter, added: “The one-year version of these bonds that went on sale in autumn last year sold rapidly, selling out in five weeks, and the bonds raised over £10bn of the total £11.3bn NS&I raised in the last financial year.

“However, the interest rates on these new bonds aren’t as enticing. There are a number of providers in the market offering higher rates. The top two-year fixed rate account in the market pays 5%, compared to the 4.6% on offer from NS&I.”

Suter added: “It’s tricky for NS&I to get the interest rate right on these products: too high and they’ll attract swathes of cash and have to pull the accounts from sale, too low and savers will go elsewhere, meaning NS&I will have to crank up the interest rate later.

“Regardless, these accounts are likely to be very popular as they are backed by NS&I and many savers have huge brand loyalty to the organisation. There are around 550,000 existing bond accounts held by NS&I customers, with an average investment of almost £52,000 in each account.”

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