5 Year @ 2.25% per annum

Delburn

ffacoffipawb said:

Does the "interest" here use up some of your personal savings allowance or is it actually a capital gain?

Neither.  It is a chargeable event gain which is taxed as income as described here:
https://www.gov.uk/government/publications/gains-on-uk-life-insurance-policies-hs320-self-assessment-helpsheet/hs320-gains-on-uk-life-insurance-policies-2017

In summary 20% is treated as having been paid by the Society and therefore:
Non tax payers - no tax to pay, but cannot reclaim the 20%.
Basic rate tax payer - no further tax to pay
Higher rate tax payer - (40% - 20%) = 20% additional tax to pay, so 0.45% of the 2.25% to pay in tax giving 1.80% net of higher rate tax (so equivalent to 3.00% gross for a higher rate tax payer)