Another kick in teeth for savers: NS&I cuts rates
Premium Bond prize chances slashed
THe savings giant NS&I is to slash rates and Premium Bond prizes for its 25million customers.
The Treasury-backed provider had offered some of the best savings rewards on the market as interest rates plummeted during the Covid-19 pandemic.
But yesterday, in a move described as a ‘kick in the teeth for savers’, it announced a range of huge cuts.
Coming in from late November, they bring NS&I’s interest rates closer to those offered by banks and building societies.
The cuts will hit popular Premium Bonds, which offer savers
‘Wants a nation of spenders’
the chance to win in monthly prize draws.
But the odds of any £1 Premium Bond number winning any prize will now decrease from 24,500 to one to 34,500 to one.
There will still be two £1million prizes in the December draw, as in September.
But the estimated number of £100,000 prizes will fall from seven in September to four in December and the number of £50,000 prizes is set to decrease from 14 to nine. Income bonds, which are popular with pensioners, will slash payouts from 1.15 per cent to 0.01 per cent.
NS&I has a duty to strike a balance between the interests of savers, taxpayers and competition in the wider financial services sector.
In July, its net financing target for 2020-21 – the amount of money it is allowed to raise – was revised significantly upwards from around £6billion to around £35billion, reflecting the Government’s need to raise cash to help combat the impact of Covid-19.
NS&I said that between April and June, it delivered £14.5billion of net financing and demand for its products has remained high between July and September. The announcement also comes after NS&I abandoned plans to implement a raft of rate cuts in May.
Chief executive Ian Ackerley said: ‘Given successive reductions in the Bank of england base rate in March and subsequent reductions in interest rates by other providers, several of our products have become “best buy” and we have experienced extremely high demand as a consequence.
‘It is time for NS&I to return to a more normal competitive position for our products.’
David Gibb, of financial advisers Quilter, said the ‘cuts to savings rates by NS&I will be a real kick in the teeth for savers at a time when many will be concerned about what is to come in the future’.
He added: ‘The Government made it clear it wanted NS&I to raise more funds but, with economic uncertainty rife, it has changed tack and wants a nation of spenders rather than savers.’