NS&I to Cut Savings Rates and Premium Bond Prices | Money

0
85


Millions of NS&I savers took a heavy blow after announcing it would cut interest rates in November and the premium bond price fund a month later.Savers with NS&I’s popular direct savings account will see rates cut from 1% to just 0.15%, while yields on income bonds – which had been the best buys – will drop 1.15 % to 0.01%.

The government-backed organization, which has 25 million customers, said there would be cuts to variable rate accounts and some fixed rates as it tries to “balance the interests of savers, taxpayers and the financial services industry as a whole ”.

It had become a first port of call for yield-seeking savers after the Bank of England cut interest rates to an all time high and savings providers began to follow.

Last week, the bank voted to keep the base rate at 0.1%, but said it was considering the possibility of lowering it below zero.

The cuts announced by NS&I on Monday are deeper than those predicted by NS&I earlier this year, but were then put on hold when the pandemic struck and have been described by experts as a “devastating blow” to savers.

From November 24, clients will see lower returns on Direct Saver, Investment Account, Income Bonds and NS&I Isas.

Junior Isa will remain the highest paying account it offers, but rates will drop from 3.25% to 1.5%. Rates on Isa direct will drop from 0.9% to 0.1%.

The premium bond changes, which will go into effect for the December draw, will reduce the price fund from an effective interest rate of 1.4% to 1%.

For bondholders, that means the odds of winning a prize amounting to £ 1 will drop from 24,500-1 to 34,500-1.

There will still be two chances of winning the £ 1million jackpot each month, but the number of £ 100,000 prizes will drop from seven to four and there will be cuts on all other prizes.

Ian Ackerley, Managing Director of NS&I, said: “Lowering interest rates is always a difficult decision.

“In April, we canceled the interest rate cuts announced in February and scheduled for May 1. Given the successive cuts in the Bank of England base rate in March and subsequent interest rate cuts by other vendors, several of our products have become the ‘best buy’ and therefore we have experienced demand. extremely high.

The shortage of decent savings rates went hand in hand with an increase in deposits in banks and building societies, as workers who kept their jobs but were able to spend as usual built up cash reserves.

Last week, construction company Skipton had to withdraw a best-buy savings account three days after a surge of customers to sign up, and according to financial information firm Moneyfacts, average interest rates on all account types are generally more than half lower on this time last year.

NS&I has set a target for treasury funding each year. That amount rose from £ 6 billion to £ 35 billion after the outbreak of the pandemic to help the government pay for its crisis measures, but between April and June £ 19.9 billion was poured into the accounts and the demand remained just as high during the summer.

Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Kevin Brown, Scottish Friendly Society Savings Specialist, said: “This announcement is a devastating blow to savers as NS&I has acted as a shield against steep market rate cuts in recent months.”

He added: “With this latest showdown coming to an end, savers will feel like they have almost nowhere to turn.”

Sarah Coles, personal finance analyst at broker Hargreaves Lansdown, said she expected more cuts from other providers.

“It won’t be the end. Competitive accounts in the easy-to-access marketplace – which have been forced to stay within earshot of NS&I in order to raise cash – will also be able to reduce their spending. This means that we are probably going to see the best rates disappear. “

LEAVE A REPLY

Please enter your comment!
Please enter your name here