National Savings brings back Growth and Income Bonds paying up to 2.2pc

The NS&I bonds were last available in 2009 when they paid more than three times as much as they do now - Getty Images

National Savings & Investments has brought back its one and three-year savings bonds having withdrawn them from sale eight years ago.

The news comes just days after the Treasury-backed organisation increased savings returns, including Premium Bond prizes, on December 1.

Savers can choose to tie up funds for one or three years with the Guaranteed Growth Bonds and Guaranteed Income Bonds.  Both types of bond can only be bought online. 

How the rates compare

The one and three-year Guaranteed Growth Bonds pay 1.5pc and 2.2pc respectively.

Savers can earn a slightly lower rate of 1.45pc or 2.15pc with NS&I’s Guaranteed Income Bonds over one or three years. Interest can be taken monthly, which is useful for some.

The rates on offer don’t quite put NS&I at the top of the tables - and are a far cry from what they once offered.

At their launch in 1999 the Guaranteed Growth Bonds paid between 5.65pc and 6.15pc, depending on the balance, for a year. Savers could earn between 6pc and 6.5pc if they chose to tie up funds for three years. The Income Bonds paid slightly less.

NS&I's bonds are not quite market leading but they do offer access - subject to a penalty - and protect savings of up to £1m Credit: Getty

When the Growth Bonds were withdrawn in 2009 they paid a standard rate of 3.95pc, or 4.4pc over three years.

The new bonds also pay less then NS&I's popular Pensioner Bonds which were launched in January 2015 and withdrawn that May. Savers over 65 could earn 2.8pc over a year or 4pc for three years. 

However savers with larger balances might prefer to keep their money with the Government backed savings organisation which guarantees deposits up to £1m.

Other providers, regulated by the Financial Conduct Authority, offering higher rates protect just £85,000 under the Financial Services Compensation Scheme.

The three-year bonds are just shy of the market leading rate of 2.25pc which are offered by Atom Bank and the Access Bank UK, the subsidiary of a Nigerian provider.

However Atom Bank is a mobile-only provider so savers can only open and manage their accounts using an app. Both banks are FSCS protected but this only covers £85,000.

What about withdrawals?

Like most fixed-rate bonds providers, Atom Bank and the Access Bank UK do not permit withdrawals during the term.

However the NS&I bonds do allow access - subject to a penalty - which is unusual.

Those who need to make withdrawals before maturity will be charged a fee equivalent to 90 days interest.

Those looking for a short term fix could get a far higher rate from Atom Bank which offers 1.95pc for a year. The top two-year bond from Secure Trust Bank offers 2.06pc.