NS&I sparks fresh wave of savings cuts

HEFTY rate cuts by National Savings & Investments are forcing building societies to slash returns to new lows.

A host of building societies, including Nationwide, Vernon, Principality, Beverley, Manchester, Family and National Counties have lined up cuts for this month. Others could follow suit.

On top, Skipton and Norwich & Peterborough swung the axe in the last few days of February.

The falls in savings returns come just weeks after National Savings & Investments (NS&I) announced it will cut rates on its Direct Isa (to 0.75 pc), Direct Saver (to 0.7 pc) and popular Income Bonds (to 0.75 pc) from May 1.

‘The NS&I cuts are a huge blow to savers,’ says Rachel Springall, from the data analyst Moneyfacts.

‘Building societies will find they are overwhelmed by savers chasing their better returns. The easy way for them to halt this is to cut their rates, too.’

Sue Hannums, director at adviser Savings Champion, says: ‘The number of building societies planning rate reductions this month is disappointing.

‘Many appear to be a reaction to the NS&I announcement that its rates will fall in May.’ The cuts to building society accounts come even though some have already lowered their rates following last August’s base rate cut to 0.25 pc.

Nationwide, the largest building society, has meted out cuts on no fewer than 28 accounts from this morning.

Its loyal savers are particularly badly hit, having suffered a cut in September. The top rate on its Loyalty Saver — for those who have been members of the society for 15 years or more — is down 0.2 points this time round to 0.75 pc.

The rate was cut in September from 1.2 pc to 0.95 pc — a total of 0.45 points.

If you have been a Nationwide member for five to ten years, you are rewarded with just 0.55 pc.

The bereaved are also hit. The society’s Inheritance Isa rate is down at 0.5 pc.

Those in one of its old accounts — issue 2 — have seen their rate nearly halve from 0.95 pc.

Inheritance Isas give an extra one-off Isa allowance, on top of the usual £15,240, to widows, widowers and bereaved civil partners. The extra allowance equals the value of your deceased partner’s Isa at the date of death, including interest. Nationwide’s Flexclusive Isa, available to those with its current account, has been cut by as much as 0.5 points. Account holders earn 0.75 pc from today. On Monday, Yorkshire BS, the second largest building society, cut the rate on its Norwich & Peterborough 50 Plus passbook account to 0.5 pc. Skipton, the fourth largest, cut its Legacy inheritance Isa to 0.95 pc from 1.5 pc last week. Principality, the sixth largest society, is dishing out big cuts from next week. Its 30 Day Direct account goes down by 0.6 points to 0.85 pc, a 40 pc fall. Following the cuts, some savers will still be getting a good deal as building societies on average pay a higher rate than big banks. For example, old issues of Principality e-Saver will earn 0.75 pc from next week.