Yet another blow that taints our National Treasure

All in all, it’s been a tough year for savers with national Savings & Investments (nS&I), as the Treasury has looked for ways to reduce inflows.

and this week’s announcement that the Guaranteed Income and Guaranteed Growth Bonds have been withdrawn from sale, while the rates on new issues for existing customers whose bonds mature on or after october 5 will be cut by 0.25 percentage points, could see many savers deciding it’s time to move on.

This most recent move is despite the fact that the march 2019 Spring Statement confirmed that nS&I’s 2019-20 net Financing target is to deliver £11 billion, up from the revised 2018-19 target of £9billion.

In layman’s terms, nS&I is looking to raise £11billion from savers, in the current tax year.

The recent decision to remove the Guaranteed Income and Guaranteed Growth Bonds from sale, while very disappointing, is not unprecedented.

Before being reintroduced in december 2017, they had been off sale for around eight years.

When they did go back on sale, they were paying competitive rates and were massively popular. So much so that just six months later, the amount that could be deposited was slashed by 99 per cent, from £1 million to only £10,000 per person, per issue.

This move was a huge blow, especially for wealthier savers looking for a secure place to hold large sums of cash in a protected environment. The biggest attraction of nS&I is that all money held is protected by Hm Treasury — not just the £85,000 protection limit that the Financial Services Compensation Scheme (FSCS) provides for funds held with UK banks and building societies.

But this wasn’t the only bad news for nS&I customers.

In July 2018, nS&I announced that the rate on the direct ISa would go down 0.25pc, to 0.75pc tax free/aER, with effect from the following September — and this cut went ahead, regardless of the fact that the Bank of England actually increased the base rate in august that year, to its highest level for more than a decade.

The rate eventually edged up 0.15 percentage points in march this year, but still stands at a frankly pretty uncompetitive 0.9pc tax free/aER.

and then yet another blow came at the end of 2018, with an announcement that from may 1, 2019, existing holders of the off-sale Index linked Savings Certificates would see the indexing change from the Retail Prices Index (RPI) to the lower Consumer Prices

Index (CPI) on maturing accounts that were reinvested.

So, all in all, nS&I is looking a lot less attractive than it was a year ago.

The good news is that, at the moment, wealthier savers can still protect up to £1million in Income Bonds — which, although the name would imply otherwise, is actually an easy-access account that pays a fairly competitive rate of 1.15pc monthly gross.

and there are a couple of other easy-access accounts paying lower rates that can shelter a further £3 million.

But for fixed-rate bonds, wealthier savers will have to look further afield and either leave some cash unprotected, if they deposit more than the FSCS limit of £85,000 (£170,000 for joint accounts) — or split their funds.

These changes will no doubt have tainted nS&I’s national Treasure reputation — but it’s unlikely that it will mean people will turn their backs completely, particularly in times of financial uncertainty such as we are facing today.

What savers can take comfort from is that these restrictions could actually encourage them to earn more money on their cash, as there are other banks and building societies that are paying far better rates of interest — and as long as the amounts held with each are kept within the FSCS limits, the cash is safe too.