NS&I to reduce savings rates and premium bond prices

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The surprise announcement is a blow to savers, many of whom have turned to NS&I as savings rates plummeted during the pandemic. NS&I Income Bonds, which currently pay 1.16% AER, have often outperformed our best easy-to-access savings buys in recent months, while in June we reported that premium bond savings had reached a record 14 years.To learn how to get the best interest rate for your savings, including our current top picks, check out our guide to the best savings accounts. And for full help on Premium Bonds, including how they work and if they’re worth it, check out our guide to Premium Bonds.

How is NS&I reducing rates?

Here’s a quick recap of the main changes that have been announced – we’ll update this story in due course with all the details and analysis:

  • NS&I will reduce variable rates, including ISAs, starting November 24, 2020. The rate on its income bonds will drop from 1.16% to just 0.01% AER, and its Direct Saver account will drop from 1% to just 0.15% AER. The rate on his investment account will also drop from 0.80% to 0.01% AER.

    Its Junior ISA will only pay 1.5% AER, compared to 3.25%, while Direct ISA will drop from 0.9% to 0.1% AER.

  • He also announced reductions in certain fixed interest rates on savings, again from November 24, 2020. The rate on its one-year guaranteed growth bonds, for example, will drop from 1.1% AER to just 0.1% AER, while its one-year guaranteed income bonds will drop from 1.06% AER to 0. , 6% AER.
  • The premium bond price rate will drop from 1.4% to 1% in December. At the moment, the reward rate for premium bonds is 1.4% – so every £ 1 bond has a 1 in 24,500 chance of winning a prize. But from the December 2020 Premium Bond draw, the odds will drop to 1 in 34,500, with more than a million fewer prizes due out in December than in September.

    NS&I, which manages premium bonds, had planned to cut the reward rate to 1.3% earlier this year, but it reversed the cut – along with planned cuts to its variable savings products – to support the savers during the pandemic.

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