Your country needs YOU to ... stash your savings in NS&I

(and for once it’s worth it as they’ve ditched their rate cuts)

THE nation’s savers are being offered top rates in an effort to line the Government’s coronavirus war chest.

Despite interest rates plunging to record lows, National Savings and Investments (NS&I) has gone against the grain and abandoned plans to cut rewards which would have cost savers £200 million.

The Treasurybacked bank says the Uturn is to support savers in the virus crisis. It will also raise more spending money for the Government to fight the Covid19 economic turmoil.

The boost for savers now means NS&I, which has 25 million customers, beats most rates offered by commercial banks. Savings accounts that have sidestepped cuts include the popular Premium Bonds, which are held by around 21 million customers.

The savings giant has been used to find money for the country in times of crisis before. In World War I, the government raised £433 million with War Savings Certificates and National War Bonds.

During World War II, savers flooded NS&I with more than £1 billion after it offered Defence Bonds and new National Savings Certificates.

Chancellor Rishi Sunak told Money Mail: ‘Our planned economic response is protecting millions of jobs, businesses, selfemployed people, charities and households. And in these unprecedented times we know savers need support too, which is why we’re stopping the planned interest rate cut.

‘NS&I and its Premium Bonds are true British institutions and provide savers with 100 pc security for their money.’

The Bank of England last month slashed its base rate to a record low of 0.1 pc, causing interest rates offered on savings to fall across the board. Some of the big banks are now offering interest rates as low as 0.01 pc on savings. ANNA

Bowes, of advice website Savings Champion, says: ‘It is extraordinary circumstances. There is a huge amount for the Government to raise from somewhere, so why not the country?’

She adds: ‘It is very welcome news for a lot of beleaguered savers who have nowhere to turn.’

Money Mail has been calling for fairer rates for loyal savers under our Stop ShortChanging Savers campaign.

NS&I announced last Friday that most of its rate reductions, due next month, would be cancelled and customers should disregard letters they had received about them. It is still going ahead with rate cuts to fixedterm accounts, which will cost savers around £38 million in interest.

The move means the prize fund rate on Premium Bonds will remain at 1.4 pc, rather than falling to 1.3 pc. The odds of any £1 bond winning in the monthly prize draw will stay at 24,500 to one, rather than fall to 26,000 to one.

Around 181,000 savers will breathe a sigh of relief that the rate on their Income Bonds will stay at 1.15 pc rather than plummet to 0.7 pc. These are available by post, phone or online and are popular with pensioners because they pay income monthly.

Former pensions minister Baroness (Ros) Altmann says: ‘It has been a torrid time for savers and ensuring that ordinary savers have a safe, secure place for their savings, offering betterthanaverage returns, is welcome.’

Other rates to dodge the axe are the Direct Saver, which will now stay at 1 pc instead of a cut to 0.7 pc, and the Investment Account, which stays at 0.8 pc instead of 0.6 pc.

Yet Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates will all see rates fall from May 1. For example, the interest rate on oneyear Guaranteed

Growth Bonds will decline from 1.25 pc to 1.1 pc. Customers with deals that mature before June 1 can still get the same rate.

NS&I announced the cuts in February, insisting it had to strike a balance between attractive rates and not undermining banks.

Laura Suter, of investment platform AJ Bell, says: ‘NS&I’s Uturn helps savers at a time when other banks are slashing rates and also raises vital money for the Government to fund its Covid19 rescue efforts.

‘With billions spent on funding businesses and individuals throughout the current crisis, the Government needs to use all its routes to raise money.’

All savings with the institution are guaranteed by the Government, compared with up to £85,000 in High Street accounts, making it popular since the 2008 financial crisis. But at a time of rockbottom interest rates, it had become a more expensive way to raise money than government bonds — or gilts.

And in the Budget in March the Government cut the amount it wanted to bring in from NS&I from between £8 and £14 billion to just £3 to £9 billion. So the better rates might be shortlived if money piles into NS&I.

Justin Modray, from Candid Financial Advice, says: ‘NS&I’s announcement will bring some relief for its many customers. Whether this commitment is longterm remains to be seen.

‘It’s hard to see the Bank of England raising its base rate any time soon, so at some point NS&I will likely have to reflect this in the rates it offers.’

Kevin Mountford, cofounder at savings platform Raisin UK, says: ‘This is good news for savers. The Government is mindful it doesn’t want to lose money at a time when it needs to raise it.’

So for now, NS&I is offering some of the best rates available. The 1.15 pc paid on the Income Bonds makes it the toppaying postal account in the market.

Its Direct Saver at 1 pc also looks competitive at a time when banks and building societies are cutting their rates.

Last Friday, when NS&I made its announcement, Marcus by Goldman Sachs cut its rate from 1.3 pc to 1.2 pc. This account has been at or near the very top of bestbuy tables since its launch more than 18 months ago.

The big traditional banks such as Lloyds, Halifax, Santander, HSBC, Nationwide, Barclays and NatWest have announced they will pay as little at 0.01 pc on their easyaccess accounts. Large building societies, including Nationwide and Yorkshire, are also paying the same pittance.

Some have even gone farther than the 0.65point cut in base rate on accounts where they can.

For example, Yorkshire’s 1 Year Limited Access Saver drops from 1.4 pc to 0.55 pc this week, while Nationwide Loyalty Saver easyaccess rate goes down by as much as 0.85 points to 0.25 pc from May 1.

Santander Junior Isa rate falls by as much as 2 percentage points to 1.25 pc from May 22.