SAVERS’ ONLY HOPE IS NS&I
SAVERS are flocking to government-backed National Savings and Investments (NS&I) after suffering a ‘devastating’ month of rate cuts.
In just three months, the average easyaccess rate has plummeted from 0.6 pc to a record low of 0.27 pc.
One of the biggest blows came last week when Goldman Sachs closed its marketleading Marcus account to new customers.
Within hours of the announcement its competitor for the top spot, RCI Bank, slashed its Freedom Account rate from 1.05 pc to 0.9 pc.
The moves follow other cuts to best buys. Virgin Money now pays new savers 0.75 pc, down from a previous 1.01 pc.
Kent Reliance has reduced its rate from 1 pc to 0.7 pc, while Family BS’s Online Saver is set to fall from 1.06 pc to 0.61 pc next week.
Rachel Springall, finance expert at Moneyfacts, says: ‘This is devasting news for savers who are already struggling to secure a decent return on their hard-earned cash. And we may see rates drop even lower in the months to come.’
Average one-year fixed rates have also tumbled from 1.15 pc in March to just 0.82 pc. It means both easy-access and oneyear bond rates are now at the lowest they have been since analysts Moneyfacts’ records began in 2007.
Some new banks — such as Aldermore, Secure Trust, Ford Money, Investec and Wyelands — which regularly offer top rates, have withdrawn from the bond market completely. New banks do not want to attract more money because they have enough to fund their current level of lending. But this has led to a dampening of competition and pushed down rates for savers.
Big banks are also paying a pittance — typically 0.01 pc on easy-access accounts or between 0.3 pc and 0.45 pc on one-year bonds. Among the worst is TSB at 0.3 pc and Co-op Bank and Santander at 0.35 pc. Last week Lloyds and Halifax launched a two-year fixed-rate bond at a miserly 0.3 pc.
The downward spiral has placed NS&I at the top of the best buy tables. So savers with its fixed-rate Guaranteed Bonds should stick with the governmentsponsored deposit taker if they are happy to tie up their money again.
The bonds are not on general sale, but those with maturing bonds can reinvest in them if they choose.
They pay 1.1 pc fixed for one year, 1.2 pc for two, 1.3 pc for three and 1.65 pc for five years as long as you pick the same term.
Among its accounts with a variable rate of interest, Income Bonds (popular with pensioners) pay 1.15 pc. The account differs from an ordinary one as interest is automatically paid into your bank account each month.
NS&I’s easy-access Direct Saver pays 1 pc and its Direct Isa 0.9 pc. Both can be opened over the phone or online. Unfortunately, you cannot transfer in other Isa cash. And it is not a flexible Isa, so if you have already put in your full Isa allowance and take money out, you cannot replace it.
NS&I says it is getting more calls than usual so you should expect a longer wait to get through. Savers are encouraged to go online if possible.