National Savings & Investments (NS&I) Premium Bond and savings accounts holders will see their returns slashed from Monday 1 May, so what options are there for hard-pressed savers?
NS&I announced earlier this year that the effective prize rate for Premium Bonds would be reduced from 1.25% to 1.15% from Monday 1 May 2017.
While the chance of winning a prize remains at one-in-30,000, the number of high value prizes in each month’s draw will be reduced.
At the same time NS&I’s Direct Isa will have its rate slashed from 1% to 0.75%, the Direct Saver will reduce from 0.8% to 0.7% and its Income Bond will go from 1% to 0.75%.
Where can I move my NS&I Direct Isa?
If you’re looking for an alternative to the easy-access Direct Isa then the top product on the market is the Post Office Money Online Isa, which pays 1.01%.
This online-only account is available for balances over £100 but includes a 0.76% bonus for the first year. After this the rate will drop to 0.25% so make a note in your diary and switch when this happens.
Elsewhere, the Skipton Building Society Bonus Cash Isa pays 1%, including a 0.35% bonus for the first year. This is available in branch, by post and online. Both accounts accept transfers from other providers.
Taking out a fixed rate Isa is likely to give you better returns. See Moneywise’s guide to the best Cash Isa rates this week for more options and full details of the products listed above.
Where can I switch my savings account?
For savers looking for a replacement for the NS&I Direct Saver and Income Bond then the Yorkshire Building Society Single Access Saver pays 1.15%. This can be opened in branch or by post but account holders are limited to one withdrawal each calendar year.
For a more flexible product the RCI Bank Freedom Saver has a rate of 1.1% for balances between £1 and £1 million. This is an online-only account and your cash is covered by the French deposit protection scheme, rather than the UK's Financial Services Compensation Scheme.
Close behind is the Bank of Cyprus UK Online Easy Access Account which pays 1.05%. This online-only account includes a 0.45% bonus which expires after a year. Savings here have the full £85,000 protection from the FSCS.
Again, those who are happy to fix their cash generally get higher returns. See Moneywise’s guide to the best savings rates this week for a full overview of the market.
Saving your money in current accounts could also be worth considering, with some accounts paying as much as 5%. Moneywise’s guide to the week’s current accounts has more details.
Is there a reason to stick with NS&I?
While the rates have dropped on NS&I’s products there are still reasons to keep your accounts open. If you have a large amount of savings then your entire savings pot is protected with NS&I, compared to only £85,000 for other providers. This is because NS&I is backed by the UK Government.
Premium Bonds give savers with the opportunity to win tax-free prizes, rather than earning interest. That means everyone with Premium Bonds has a chance of winning the jackpot £1 million prize each month – albeit with a smaller chance than in the past.
But some experts argue that if your savings are returning basically nothing, you might as well opt for the chance of the jackpot prize. For more on this read Moneywise editor Moira O’Neill’s in depth analysis of whether you should stick with Premium Bonds.