NS&I has cut rates widely across its fixed and variable savings products and reduced the number of Premium bond prizes with effect from 1 May.
The Government-backed savings body with 25m customers says the changes will ensure NS&I’s interest rates are “positioned appropriately” against those of its competitors.
The cuts are also being made due to falling gilt yields which are used as a benchmark by NS&I to set rates.
The Direct Saver account will fall from 1% gross to 0.7%, the Investment Account from 0.8% gross to 0.6% gross and Income Bonds from 1.14% gross to 0.7%.
The Premium Bond prize fund rate will drop by 10 basis points from 1.4% to 1.3%. This will reduce the odds of winning from 24,500/1 to 26,000/1.
As a result the number of £100 prizes awarded will drop from 27,221 to 13,448 although there will still be two ‘million pound’ prizes a month and only modest reductions in the number of prizes above £1,000.
Ian Ackerley, NS&I chief executive, said: “These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.”
Details of the rate changes:
Variable rate savings products
Product | Current rate | Interest rate from 1 May 2020 (change in brackets) |
Direct Saver | 1.00% gross/AER | 0.70% gross/AER (-30 basis points) |
Investment Account | 0.80% gross/AER | 0.60% gross/AER (-20 basis points) |
Income Bonds | 1.15% gross / 1.16% AER | 0.70% gross / 0.70% AER (-45 basis points) |
Premium Bonds (effective from 1 May 2020)
The Premium Bonds prize fund rate will be reducing by 10 basis points, from 1.40% to 1.30%. The odds of any £1 Bond number winning any prize will decrease from 24,500/1 to 26,000/1. The changes will be effective from the May 2020 prize draw.
Current prize fund rate | Current odds | New prize fund rate (from 1 May 2020) | New odds (from 1 May 2020) |
1.40% tax-free | 24,500 to 1 | 1.30% tax free | 26,000 to 1 |
Value of Premium Bonds prizes
Value of prizes | Number of prizes in February 2020 | Number of prizes in May 2020 (estimate) |
£1,000,000 | 2 | 2 |
£100,000 | 6 | 5 |
£50,000 | 12 | 11 |
£25,000 | 23 | 21 |
£10,000 | 59 | 54 |
£5,000 | 119 | 106 |
£1,000 | 1,984 | 1,857 |
£500 | 5,952 | 5,571 |
£100 | 27,221 | 13,448 |
£50 | 27,221 | 13,448 |
£25 | 3,408,513 | 3,262,871 |
Total: | 3,471,112 | 3,297,394 |
Fixed term savings products
Customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates and whose investments mature on or before 1 June 2020 and who automatically renew into a new Issue of the same term, will receive the previous, higher interest rate. However, any customers who choose to renew into a new Issue but a term of a different length, will receive the reduced interest rate effective from 1 May 2020.
Current holdings will be unchanged until they mature and customers do not need to take action now. NS&I will write to all holders of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates at least 30 days before the end of their term.
Product | Current rate | Interest rate from 1 May 2020 (change in brackets) |
Guaranteed Growth Bonds (1-year) | 1.25% gross/AER | 1.10% gross/AER (-15 basis points) |
Guaranteed Growth Bonds (2-year) | 1.45% gross/AER | 1.20% gross/AER (-25 basis points) |
Guaranteed Growth Bonds (3-year) | 1.70% gross/AER | 1.30% gross/AER (-40 basis points) |
Guaranteed Growth Bonds (5-year) | 2.00% gross/AER | 1.65% gross/AER (-35 basis points) |
Guaranteed Income Bonds (1-year) | 1.20% gross / 1.21% AER | 1.05% gross / 1.06% AER (-15 basis points) |
Guaranteed Income Bonds (2-year) | 1.40% gross / 1.41% AER | 1.15% gross / 1.16% AER (-25 basis points) |
Guaranteed Income Bonds (3-year) | 1.65% gross / 1.66% AER | 1.25% gross / 1.26% AER (-40 basis points) |
Guaranteed Income Bonds (5-year) | 1.95% gross / 1.97% AER | 1.60% gross / 1.61% AER (-35 basis points) |
Fixed Interest Savings Certificates (2-year) | 1.30% tax-free/AER | 1.15% tax-free/AER (-15 basis points) |
Fixed Interest Savings Certificates (5-year) | 1.90% tax-free/AER | 1.60% tax-free/AER (-30 basis points) |