Savers have been dealt a fresh blow after the Government's savings bank cut interest rates on its flagship bonds - prompting warnings of "tougher times ahead".

National Savings and Investments (NS&I), which is backed by the Treasury, has launched new versions of its British Savings Bonds, paying lower rates than previously offered. The changes, which came into effect on Thursday, impact its two, three, and five-year fixed-term products.

NS&I said the move was "in response to changes in the wider market", with analysts expecting the Bank of England to begin cutting base rates in the coming months - further squeezing returns for those trying to grow nest eggs.

The returns on NS&I's two-year Guaranteed Growth Bonds have been cut from 4% to 3.85% AER, while the three-year bonds drop from 4.1% to 3.88% AER. The five-year version now pays 3.84%, down from 4.06%.

For those relying on monthly income, Guaranteed Income Bonds offer slightly lower gross returns, though the AER remains the same.

Andrew Westhead, NS&I's retail director, said the changes would help "balance the interests of savers, taxpayers and the broader financial services sector".

He added: "This is the first change to our Junior ISA interest rate in nearly two years, reflecting our ongoing commitment to helping young people save for their future."

From July 18, NS&I's Junior ISA rate will also be cut, dropping from 3.65% to 3.55% AER (tax-free) for under-18s.

The decision sparked criticism from experts who warned savers could now face an uphill battle to secure decent returns - particularly those sticking with NS&I out of loyalty or a desire for security.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "These new rates show tougher times ahead for savers with interest rates starting to slide on these new savings bonds.

"We've also seen the first cut in two years to NS&I's Junior ISA with rates sitting at 3.55% from 18 July."

However, she noted the bonds still hold strong appeal for those with large sums to deposit. NS&I products allow savers to put away up to £1 million, with the entire amount fully protected by the Government - removing the need to split money across multiple banks to stay within the Financial Services Compensation Scheme (FSCS) limits.

"There remains strong appeal to these products, and they will remain popular with savers with large amounts of savings," said Ms Morrissey.

But she added a warning: "The good news is that savers can still get more for their savings elsewhere."

According to the latest Moneyfacts data:

• Two-year fixed bonds pay up to 4.43%
• Three-year bonds offer as much as 4.42%
• Five-year deals can reach up to 4.47%

Savers willing to do a bit of homework and consider other providers could still "get far more for your money", she said.

To help manage their money more effectively, Ms Morrissey advised that those wary of rate cuts or managing multiple accounts could consider using a cash savings platform, allowing them to spread funds across different banks while monitoring them in one place.

There has been no change to NS&I's one-year British Savings Bonds.

Despite falling rates, NS&I's fixed-term products remain popular for their unique government backing - a rare level of security amid growing uncertainty in the broader savings market.