TNS&I Savings Bank was accused this week of shutting the door on UK savers after cutting interest rates on a slew of accounts. Suddenly, clients who have enjoyed some of the best returns on the market have rates as low as 0.01%.
The magnitude of the NS&I (National Savings & Investments) interest rate cuts has stunned many commentators: for example, the yield on its income bonds will drop from 1.15% to 0.01%. As a result, someone with £ 1000 saved in the account will receive 10 pence gross interest after one year. So, after more than 20 years, you might generate enough interest to buy a cup of coffee.
NS&I has also reduced the chances of making money on premium bonds, which will affect around 24 million people.
So what are the best options for NS&I customers and those looking for a half decent savings rate?
Fortunately, all is not gloomy and gloomy. Several savings accounts have been launched over the past few days, including one from market-leading NatWest which pays 3% interest.
We rounded off the products subject to a rate cut and offered alternatives. All interest rates were correct at the time of writing, but things are moving fast, so Moneyfacts.co.uk is a good place to get the latest information.
This is an easy access account offered by NS&I which currently pays 1%. From November 24, it will drop to 0.15%.
NS&I also lowers the rate on its investment account, which allows you to withdraw money without notice or penalty, but must be handled by mail. The rate will drop from 0.8% to 0.01%.
The alternatives On Thursday, the Coventry Construction Company launched Double Access Saver (online) (2), which pays variable interest of 1.1%. This is the replacement of a previous paid version of 1.2% which was on sale for a few days before being withdrawn this week after a “completely new” request.
The minimum balance is £ 1 and the maximum is £ 250,000, and this account has limits on withdrawals. Savers can access their money twice a year at no cost, but any additional withdrawals will incur a charge equivalent to 50 days of interest on the amount withdrawn. So it will not suit everyone. But if it works for you, you need to act fast.
Other easy-to-access and decent accounts include Yorkshire Building Society’s Internet Saver Plus Issue 7, which would be especially suitable for those with a larger sum to stow away. It pays a variable of 0.2% on £ 1 and over, rising to 0.65% for over £ 1,000, 0.95% for over £ 10,000 and 1% for £ 50,000 or more. This account allows unlimited withdrawals and can be opened online with a minimum of £ 1.
Atom digital bank just launched Instant Saver, paying a variable 0.75%. It has no restrictions or penalties – you can withdraw or add money as many times as you want on savings ranging from 1p to £ 100,000. New customers can apply by downloading the Atom app.
These have been popular with those looking for monthly income and easy access to their money. NS&I calls them a “nice little income,” but the descriptions of the trades might have something to say about that when the rate cut goes into effect on November 24.
The alternatives Coventry’s Double Access Saver (online) (2) account highlighted above also offers a monthly interest option – the rate is 1.09% gross per annum or 1.1% AER. This is a limited access account, but many people won’t be too concerned about the limits on withdrawals.
Meanwhile, there are one-year fixed rate accounts paying over 1% that offer a monthly interest option. Aldermore Bank One Year Fixed Rate Savings Account pays 1.25% monthly interest. The minimum deposit is £ 1000, maximum £ 1 million.
This NS&I cash Isa has been popular, but its rate will drop from 0.9% now to 0.1% on November 24.
The alternatives If you are transferring money from one Isa to another, your chosen account must accept transfers. You can often request the transfer of your existing Isa as part of the process of opening the new one. The accounts listed here accept all transfers in.
Skipton Building Society’s Cash eISA Saver Issue 6, launched Thursday, pays 1%. The minimum deposit is £ 1 and it is described as easy access without notice for withdrawals.
Coventry Building Society’s Isa Triple Access (Online) has a variable rate of 0.96%. The minimum balance is £ 1 and you can access your money up to three times a year at no cost.
Yorkshire Building Society Internet Saver Isa Plus Issue 7 pays a variable rate: 0.2% from £ 1, 0.55% from £ 1,000, 0.91% from £ 10,000 and 0, 94% from £ 50,000. It allows unlimited withdrawals.
NS&I Fixed Term Savings Products
In November, NS&I will also cut rates sharply on its fixed-term products: its guaranteed growth bonds, its guaranteed income bonds and its fixed-rate savings certificates. The current ones all pay more than 1%, but the new rates range from 0.06% to 0.55%.
These products are not on general sale and are only available to customers wishing to renew an existing investment when it expires. People’s current products will remain unchanged until maturity.
The alternatives With Guaranteed Growth Bonds and Guaranteed Income Bonds, you will not be able to access your money until the bond matures, while Fixed Interest Savings Certificates can be redeemed early subject to an interest penalty. So these alternatives are for if you have new money to put in or if you have reached the end of an account term.
Right now, the highest paying fixed rate bonds from other providers are paying around 1.30% for one year to 1.5% -1.6% for five years. At OakNorth Bank, you can earn 1.26% over a year on payments starting at £ 1. A five-year foreclosure will earn you 1.6% at the Bank of London and the Middle East, but you’ll need to deposit at least £ 1,000.
NS & I’s pays 3.25% at the top of the table, but that rate drops to 1.5% on November 24.
The alternatives With Junior Isas, no withdrawals are allowed (except in very limited circumstances) until the youngster turns 18, but you can transfer elsewhere at any time.
Junior Cash Isa from Coventry (1) pays 2.95%, while Junior Cash Isa from Tesco Bank offers 2.75%. Several suppliers pay 2.5%.
NS&I is reducing the “prize fund rate” from 1.4% to 1% from December, meaning the odds of winning a prize with each bond number of £ 1 will increase to 34,500-1. This compares to 24,500-1 currently. And there will be less prizes of greater value.
The alternatives There is nothing else like premium bonds, so you’ll have to decide if you’re happy to stay or want to bail out.
It won’t make you a fortune, but if you have a NatWest checking account, its new Digital Regular Saver might be worth funneling the money. You can save between £ 1 and £ 50 per month, and he pays 3% on balances between £ 1 and £ 1,000 (but only 0.01% on anything over £ 1,000). You can withdraw your money at any time.