Savers’ blow as NS&I rates cut hits 21 million customers

Acting NS&I CEO Steve Owen
Acting NS&I CEO Steve Owen

Millions of savers have been dealt another blow as National Savings and Investments (NS&I) has announced a wave of cuts to its Premium Bond prizes and savings rates.

In a move affecting more than 21 million customers, the changes from May 1 will apply to Premium Bonds, the Direct ISA, the Direct Saver and Income Bonds.

NS&I said the move follows reductions in interest rates, after the Bank of England base rate was cut to 0.25% in August.

Money held with NS&I is 100% backed by the Treasury. NS&I has a duty to balance the needs of savers and taxpayers and help ensure the stability of the broader financial services sector.

The changes will see a 1% rate on NS&I’s Direct Isa fall to 0.75%, a 0.8% rate on its Direct Saver will fall to 0.7% and a 1% rate on Income Bonds will fall to 0.75%.

The total value of Premium Bond prizes in May will be an estimated £63,810,400, down from £69,516,050 this month.

NS&I acting CEO Steve Owen said: “The new rates reflect current market conditions and allow us to continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.

“We appreciate that savers will be disappointed, but we believe that the new rates present a fair offer to customers, who will continue to benefit from our 100% HM Treasury guarantee on all holdings, as well as tax-free prizes for Premium Bonds.”

As announced in the Autumn Statement, NS&I is to launch a new market-leading three-year bond this spring.

The rate is expected to be around 2.2% and the precise rate will be confirmed nearer to the launch. The bonds will be available to people aged 16 and over who have £100 to £3,000 to put away.

Chartered financial planner Danny Cox said: “This cut in interest rates is another devastating blow for millions of savers and the new launch of Investment Guaranteed Growth Bonds will be of little compensation.