SAVERS have been given a boost after NS&I said it would scrap its planned interest rate reductions on some of its products and would no longer be cutting the Premium Bond prize.
The savings bank, which is backed by the government, had been due to drop the interest rates on its variable products from May 1, but will now not implement the changes.
Instead rates will remain the same.
“Customers should disregard any letters or notifications that they have received, or will receive, about interest rate cuts to NS&I variable rate savings products,” the company said.
It did not say whether it would be making the change later in the year instead.
The Premium Bonds prize fund rate will also remain the same at 1.4 per cent, rather than dropping to 1.3 per cent as had been planned.
That means the odds of any £1 bond number winning any prize will remain at 24,500 to one, instead of dropping to 26,000 to one.
Remember, the Premium Bond fund rate is not the same as an interest rate – you only benefit if your bond number is drawn as a winner.
What are the interest rates on NS&I variable products?
The interest rate on these products will now remain the same.
- Direct saver: 1 per cent
- Investment account: 0.8 per cent
- Income bonds: 1.15 per cent
However, interest rate reductions on NS&I's fixed term products, which were also announced in February, will go ahead as planned on May 1.
Customers holding guaranteed growth bonds, guaranteed income bonds and fixed interest savings certificates, whose investments mature on or before June 1 2020 and who automatically renew will still receive the previous, higher interest rate.
But any customers who choose to renew but change the length of their term will receive the reduced interest rate.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Part of NS&I’s remit is to balance the needs of savers with the demands of the Treasury, and clearly it has decided that savers need all the help they can get at the moment.
“Premium Bonds are a national treasure, and can be a useful place to keep your emergency savings – because it’s easy to get hold of your cash, they offer the chance of a prize, and there’s the glimmer of a hope that your sensible safety net will win you £1million.
“The decision to cancel this cut will mean the odds remain at (an admittedly pretty long) 24,500 to one.”
But she said even “the most committed NS&I savers should think twice” before opting for one of the company’s fixed rate bonds, and better deals are available elsewhere.
What are the changes to NS&I fixed rate products?
Here are how the interest on fixed rate products will change.
- Guaranteed growth bonds (one year): currently, 1.25 per cent, will be 1.1 per cent from May 1
- Guaranteed growth bonds (two year): currently, 1.45 per cent, will be 1.2 per cent from May 1
- Guaranteed growth bonds (three year): currently, 1.7 per cent, will be 1.3 per cent from May 1
- Guaranteed growth bonds (five year): currently, 2 per cent, will be 1.65 per cent from May 1
- Guaranteed income bonds (one year): currently, 1.2 per cent, will be 1.05 per cent from May 1
- Guaranteed income bonds (two year): currently, 1.4 per cent, will be 1.15 per cent from May 1
- Guaranteed income bonds (three year): currently, 1.65 per cent, will be 1.25 per cent from May 1
- Guaranteed income bonds (five year): currently, 1.95 per cent, will be 1.6 per cent from May 1
- Fixed interest savings certificates (two year): currently 1.3 per cent, will be 1.15 per cent from May 1
- Fixed interest savings certificates (five year): currently 1.9 per cent, will be 1.6 per cent from May 1
She pointed to a one-year fixed rate bond with BLME bank, which pays 1.65 per cent, a two-year fixed rate bond with BLME which pays 1.75 per cent, or a three-year fixed rate bond with United Trust Bank and Vanquis Bank which pays 1.8 per cent.
NS&I also urged customers to go online if they wish to invest or if they need help to manage their savings during the coronavirus pandemic.
It said this would help it free up its contact centre capacity for customers who need to access it most at this time.
Customers should also only send NS&I anything by post if they have no other choice, it added.
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