NS&I to slash savings accounts and make it harder to win Premium Bonds
NS&I will slash interest rates on savings accounts and make it even harder to win on Premium Bonds in the latest blow for savers.
From November, National Savings & Investments (NS&I) will cut the rate on its easy access account to a measly 0.01%.
Until recently, the account topped best-buy charts as it paid 1.16% on savings but this will plummet over the next few months.
It will see the amount earned on £10,000 savings over a year drop from £116 to just £1.
Now, the top rate easy access account is with Coventry Building Society, which pays 1.2%. Over a year, you'll earn £120 on £10,000 savings.
It is axing rates across all of its savings accounts - you can see the rate drops in the box below.
NS&I saving rates
THE NS&I is slashing its saving rates from November. Here's how they will change:
- Direct Saver: From 1% to 0.15%
- Investment Account: From 0.8% to 0.01%
- Income Bonds: 1.16% to 0.01%
- The Junior Isa: From 3.25% to 1.5%
- Direct Isa: From 0.9% to 0.1%
From December, it will be harder to win on the Premium Bonds too, which is also subject to the rate drop.
Currently, it pays 1.4% on them, so each £1 bond has a 1 in 24,500 changes of scooping a prize.
But this will be cut to 1%, lowering your odds of winning to 1 in 34,500.
The number of prizes will be slashed too, from 3,856,040 in September to 2,850,256 in December.
The rate drop will come as a shock to savers who have turned to the NS&I, which is government-backed, after the Bank of England brought the base rate to a record low of 0.1%.
Since March, banks and building societies have slashed rates across the board, but the NS&I scrapped its planned interest rate reductions.
It had hoped to reduce the rate on Premium Bonds to 1.3% but this latest round of changes will see odds plummet even further.
Anna Bowes from Savings Champion slammed the cuts as "savage" and "devastating".
Sarah Coles, personal finance analyst at Hargreaves Lansdown said: "The sheer scale of cash pouring into its coffers meant it was rapidly eating into its fundraising target.
"Hopes that it would extend the target to protect savers have been dashed.
"NS&I always has to balance the needs of savers and the taxpayers who’ll eventually end up picking up the bill, and it finally reached the point where it couldn’t justify paying over-the-odds."
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Kevin Brown, savings specialist at Scottish Friendly, warns savers that it could take a while before rates even come close to pre-pandemic levels.
He said: “Now could be a good time for people to divert some of their regular savings into paying down any debt that they have, as any interest made on cash savings will likely be swallowed up by the interest on credit repayments and the effects of inflation.
"Others may also want to consider stocks and shares as an alternative to cash, as they can offer the potential for more attractive returns, albeit with some risk attached."
Ian Ackerley, NS&I chief executive, said that reducing rates is "always a difficult decision" but blamed an increase demand for its top-rate accounts.
He said: "It is important that we strike a balance between the interests of savers, taxpayers and the broader financial services sector; and it is time for NS&I to return to a more normal competitive position for our products."
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