Following a fanfare of the return of the 2 to 5-year Guaranteed Growth and Guaranteed Income bonds to the open market in early August this year, National Savings & Investments (NS&I) has now cut the rates on offer for both new and existing customers.
The latest news about a cut to the 2, 3 and 5 year bond rates follows a less publicised cut to the rate of the 1-year term last month, a disappointment for anyone with NS&I bonds who have not yet rolled over.
The 1-year bond was the first to fall!
In a stealthy move the state-owned bank quietly cut the rollover rate it is offering for those looking to roll over their maturing bonds for another year.
At the end of July, NS&I announced that those with bonds maturing could roll over for another year, with a rate of 5.15% AER or 5.05% gross monthly. This was a very competitive rate as the top rates at the time were paying around 5.25%.
But for those who have yet to receive the reinvestment option letter, the rate on the latest 1-year bond is now 4.75% AER – or 4.65% for those who would prefer a monthly income.
In August 2023, some 225,000 savers rushed to fix at a market-leading 6.20% for a year and poured around £10billion into these bonds in the 5 weeks they were available.
The longer-term bonds have not been spared.
The latest move by NS&I means that those who would have preferred to lock up their cash for longer, will be offered lower rates too if they have not yet received their maturity letter.
NS&I has been writing to savers at least 30 days before their bonds mature offering them the new rate, so if you’ve not had yours yet, you’ll be affected.
How do these new rates compare?
The new rates are disappointing, but the good news is that there are rates available from the rest of the market that are better than even the previous higher NS&I rates, as the table below shows. So, these cuts could encourage savers to shop around to earn more.
NS&I is often considered the gold standard when it comes to the protection offered on cash savings, and it's not hard to see why. As an institution, NS&I is unique because it is fully backed by HM Treasury. This government guarantee means that 100% of any money you invest with NS&I is safe, no matter how much you save. That said, other banks or building societies, are protected by the Financial Services Compensation Scheme (FSCS) up to a limit of £85,000 per person per institution, so for those with less than £85,000 or prepared to open multiple accounts, NS&I may not be the first choice.
The advent of cash savings platforms has added another option for those with larger amounts of cash.
Think of a cash savings platform like a savings supermarket, where with a single application and log-in, you can pick and choose multiple competitive savings accounts - from easy access to fixed term bonds - and providers at the click of a button. Whilst not whole of market, cash platforms do make it easier to spread your cash, so that it can be better protected by the Financial Services Compensation Scheme (FSCS).
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