NS&I to slash interest rates from November

Monday, 21 September 2020 10:35

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NS&I is to make sweeping cuts to most of its savings products from 24 November.

Premium Bond prize-fund rates will also be cut from the December draw.

The cuts will mean the rate on the Direct Saver account will fall from 1% gross to 0.15% gross and the rate on Income Bonds will reduce from 1.15% to 0.01% (see tables below).

The rate paid on 3 year Guaranteed Income Bonds will go down from 1.25% gross to 0.36%.

NS&I said it was reducing rates to reflect market conditions and align rates with competitors.

Ian Ackerley, NS&I chief executive, said: “Reducing interest rates is always a difficult decision. In April we cancelled interest rate reductions announced in February and scheduled for 1 May.

“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 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.”

In July this year, NS&I’s Net Financing target for 2020-21 was revised from £6 billion to £35 billion to reflect the Government’s funding requirements due to the Covid-19 pandemic. In Q1 2020-21 (April-June), NS&I saw inflows of £19.9 billion and delivered £14.5 billion of Net Financing.

Variable rate savings products

*Product*	*Current interest rate*	*Interest rate from 24 November 2020 (change in brackets)*
Direct Saver	1.00% gross/AER	0.15% gross/AER (-85 basis points)
Investment Account	0.80% gross/AER	0.01% gross/AER (-79 basis points)
Income Bonds	1.15% gross/1.16% AER	0.01% gross/0.01% AER (-114/115 basis points)
Direct ISA	0.90% gross/AER	0.10% gross/AER (-80 basis points)
Junior ISA	3.25% gross/AER	1.50% gross/AER (-175 basis points)

Premium Bonds (effective from December 2020)

The Premium Bonds prize fund rate will be reducing by 40 basis points, from 1.40% to 1.00%. The odds of any £1 Bond number winning any prize will decrease from 24,500/1 to 34,500/1. The changes will be effective from the December 2020 prize draw.

Current prize fund rate	Current odds	New prize fund rate (from December 2020)	New odds (from December 2020)
1.40% tax-free	24,500 to 1	1.00% tax free	34,500 to 1

Value of Premium Bonds prizes

Value of prizes	Number of prizes in September 2020	Number of prizes in December 2020 (estimate)
£1,000,000	2	2
£100,000	7	4
£50,000	14	9
£25,000	28	16
£10,000	71	43
£5,000	140	83
£1,000	2,204	1,639
£500	6,612	4,917
£100	30,244	26,637
£50	30,244	26,637
£25	3,786,474	2,790,269
Total:	3,856,040	2,850,256

Product	Current interest rate	Interest rate from 24 November 2020 (change in brackets)
Guaranteed Growth Bonds (1-year)	1.10% gross/AER	0.10% gross/AER (-100 basis points)
Guaranteed Growth Bonds (2-year)	1.20% gross/AER	0.15% gross/AER (-105 basis points)
Guaranteed Growth Bonds (3-year)	1.30% gross/AER	0.40% gross/AER (-90 basis points)
Guaranteed Growth Bonds (5-year)	1.65% gross/AER	0.55% gross/AER (-110 basis points)
Guaranteed Income Bonds (1-year)	1.05% gross / 1.06% AER	0.06% gross / 0.06% AER (-100 basis points)
Guaranteed Income Bonds (2-year)	1.15% gross / 1.16% AER	0.11% gross / 0.11% AER (-115 basis points)
Guaranteed Income Bonds (3-year)	1.25% gross / 1.26% AER	0.36% gross / 0.36% AER (-90 basis points)
Guaranteed Income Bonds (5-year)	1.60% gross / 1.61% AER	0.51% gross / 0.51% AER (-110 basis points)
Fixed Interest Savings Certificates (2-year)	1.15% tax-free/AER	0.10% tax-free/AER (-105 basis points)
Fixed Interest Savings Certificates (5-year)	1.60% tax-free/AER	0.50% tax-free/AER (-110 basis points)

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NS&I to slash interest rates from November