Good Afternoon Savers and Premium Bond Holders hit by big squeeze on NS&I Rates We append below an article from The Times published detailing the cuts to rates for NS&I and the scaling back of winnings! “Millions of savers will see their returns plummet after National Savings and Investments slashed its interest rates. The move, which affects 25 million people, has been described by analysts as “devastating” for the market. NS&I is to reduce rates on several accounts, including cutting two market-leading products to 0.01%, and will significantly worsen the odds on winning in its Premium Bonds prize draw. Experts believe that commercial banks will be encouraged to cut their own rates in response. NS&I, which is backed by the Treasury, said that it had no choice but to act because savers had put away billions more than usual during the Covid-19 lockdown, which left it in danger of breaching its government-mandated funding limit for the year. About £9 billion was invested with NS&I in July – nine times the typical amount – which helped to raise its total for the financial year so far to a record £23 billion, according to figures provided by the Building Societies Association. The maximum that NS&I can raise, known as its net financing target, is £35 billion. NS&I said yesterday that it would cut rates for its 186,000 income bonds savers from a market-leading 1.16% to 0.01%, and for its 172,000 direct saver customers from 1% to 0.15%. The income bonds and direct saver customers are some of the bank’s richest. Their accounts contain a combined total of £40 billion, or 16% of the total held in all NS&I accounts. The rate on the bank’s investment account, which has 1.5 million customers, will be cut from 0.8% to 0.01%. The changes, which take effect from November 23, mean that a saver with £20,000 invested in the bank’s income bonds account at 1.16%, who would previously have expected to earn £231.22 in a year, would have the gain reduced to £2. The bank is making is Premium Bonds prize draw less attractive by lengthening the odds of winning, dealing a blow to the 21 million investors who have put £88.5 billion into the product. From December the odds of any £1 Premium Bond number winning a prize will lengthen from 24,500-to-1 to 34,500-to-1. This will mean that 2,850,000 prizes will be given out in December, a million fewer than this month. Ian Ackerley, NS&I chief executive, said that demand for its most competitive products had been ‘extremely high’ since the Bank of England cut the base rate to a record low of 0.1% in March, which had led to several banks also cutting rates. A number of high street banks offer 0.01% interest on easy-access savings accounts. “While a cut of some description was not completely unexpected, the savageness of the cuts will be devastating,” Anna Bowes, co-founder of Savings Champion, an advice site, said. “The competition we have seen in the savings market could swiftly end, as providers could be swamped with new money.” The cuts led to renewed calls for the Treasury to ditch NS&I’s fundraising limit, which was put in place to stop it gaining an unfair advantage over its commercial rivals, and to allow it to issue bonds to promote saving, which would in turn help to fill the Treasury’s coffers during the pandemic. The former pensions minister Baroness Altmann said that these could be called “Covid bonds” with interest rates of 2% or more. “Why not help savers and make them proud to do something for the country at the same time?” she said. A survey of NS&I customers by the wealth manager Hargreaves Lansdown found that a third chose the bank because it was a safe haven. The Treasury guarantees the first £85,000 of an individual’s savings if a bank goes bust, whereas the entire amount invested in NS&I is protected. ” Please find below the link to the above article: As always, if you require professional objective advice – building a financial plan to meet your longer term objectives, simply get in touch. As Independent Financial Adviser’s we are able to provide independent agnostic views of all investment products and build a plan at low cost, selecting the leading products from the investment and savings universe. Stay safe and healthy. We wish you and your families the very best during these seriously challenging times. Best Wishes. Richard & the Best Price FS Team |