Savers sold down the river yet again
tor of policy at royal London, said: ‘Savers have been taking a hammering for a decade and it would be truly extraordinary if NS&I cut their savings rates when others are starting to increase theirs.’
NS&I accounts are popular because savers’ cash is fully protected by the government. At banks, only £85,000 is guaranteed under the Financial Services Compensation Scheme if a firm fails.
each year the government sets NS&I a fundraising target, which it must not exceed. For this tax year – between April 1 and March 31 – the target is just £6billion (plus or minus £3billion each side). This is its lowest limit for five years, down from £8billion in the previous tax year. When the target is low NS&I must avoid attracting too much cash so it does not overshoot it. This typically means offering lower rates or introducing stricter limits on how much people can invest.
In June, NS&I came under fire for slashing the amount new savers can invest in its guaranteed growth or guaranteed Income Bonds from £1 million to just £10,000. experts said if the government increases NS&I’s target to nearer £20billion it would be forced to boost its rates to attract more savers’ money. And when NS&I increases its rates, other banks and building societies often follow with more competitive deals of their own.
ros Altmann, former pensions minister and campaigner for older people, said: ‘It seems unfair on savers that the safest savings accounts, backed by the Treasury, are cutting interest rates at the time the Bank of england has increased base rate.’
An NS&I spokesman said: ‘NS&I sets its interest rates to balance the interests of its savers, taxpayers and the stability of the broader financial services sector.’ A Treasury spokesman said: ‘When setting the rates of NS&I products, it’s important we get the best possible value for taxpayers, while still offering a competitive rate for savers.’