🔔 NS&I to slash rates on savings accounts

NS&I is the latest provider to announce swingeing cuts to its hugely popular stable of savings accounts.

All accounts except the Direct Cash ISA, Junior ISA and Index Linked Certificates will be cut by up to 0.45% from 1st May 2020 (see table below for more details).

Even the Premium Bond prize fund rate did not escape the carnage. It will be cut from 1.40% to 1.30%, reducing the odds of any £1 Bond number winning a prize from 24,500/1 to 26,000/1.

This news will be a huge blow to savers who have invested with NS&I in their millions – and no doubt will make the new Chancellor of the Exchequer very unpopular.

NS&I’s Chief Executive, Ian Ackerley said:

Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors. These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.

But his words of explanation will be of little comfort to those who will feel that once again being loyal has no value.

That said, when you compare the rates on offer from NS&I to the high street banks, even after this move NS&I rates are far better. For example, from 1st May the NS&I easy access Direct Saver will be cut from 1% to 0.70% AER. But HSBC’s Flexible Saver and Lloyds Banks Easy Saver are paying just 0.10%.

Santander is a little more generous, paying 0.35% on its Everyday Saver or 0.40% for 12 months on its eSaver account, after which the funds will move into the Everyday Saver account.

There are plenty of alternative easy access and fixed rate accounts that savers can switch to, although if you hold more than £85,000 you will need to open multiple accounts to retain the same level of protection – and they don’t need to wait until May to start earning more.

As our Easy Access best buy table shows, rates of up to 1.31% AER can be earned from Virgin Money's Double Take E-Saver Issue 14 – if you want monthly interest the gross rate on the account 1.30% monthly gross/1.31% AER (although it’s worth noting that you can only make two capital withdrawals from this account each year).

And although the NS&I Guaranteed Income and Guaranteed Growth bonds are no longer on sale to new customers, existing bond holders are able to roll over. Once again, although better than the high street banks, far better rates can be found as our Fixed Rate Bonds and Sharia Fixed Term Accounts best buy tables indicate.

For those people who have funds with NS&I, if ever there was a reason to start shopping around, it is now. NS&I will very rarely pay the best rates on the market and these cuts will have a very real effect on the pounds in NS&I savers’ pockets.

Click here to listen to Anna Bowes discussing the impact of these changes and what savers can do to help themselves with Paul Lewis on BBC Radio 4 Money Box.

Rate changes to come into effect

Variable rate savings products - currently on sale

Fixed rate savings products - for maturity customers only

Customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates and whose investments mature on or before 1 June 2020 and who automatically renew into a new Issue of the same term, will receive the previous, higher interest rate.

However, any customers who choose to renew into a new Issue but a term of a different length, will receive the reduced interest rate effective from 1 May 2020.