NS&I has reduced the interest rate it pays new customers on its three-year guaranteed growth and guaranteed income bonds by 0.25%.
The new issue (issue 57) three-year guaranteed growth bond, available from 6 March, pays 1.95% gross for three years, down from 2.2% on the previous issue.
NS&I’s guaranteed growth bonds are fixed-rate savings accounts, run online for savers with £500 or more to invest. Interest is taxable.
Meanwhile, the rate on the new issue (also issue 57) three-year guaranteed income bond, also launched on 6 March, pays 1.9%, again guaranteed for three years, down from a former 2.15%.
NS&I’s guaranteed income bonds, pay savers a monthly income. Again, £500 is required to open the account which is run online. Interest is also taxable.
The government-backed savings provider is only reducing rates on its three-year bonds, the one-year versions will not be affected.
Savers who already have three-year bonds will not be affected either, the rate reduction only applies to new customers.
Commenting on the decision to reduce rates, Jill Waters, retail director at NS&I says: “NS&I was delighted to bring these highly popular bonds back onto the market at the start of December and demand for the bonds in the first three months has been high.”
“It is always a difficult decision to reduce rates but these changes will allow us to manage demand in order to achieve our net financing target, while continuing to deliver positive value to taxpayers. The new rates present a fair offer, and customers continue to benefit from a high holding limit and 100% security on all deposits.”
In the autumn budget (2017/18), NS&I’s net financing target was reduced from £13 billion to £8 billion (in a three billion range either side of this). This target is set by the Treasury and is a measure of cash coming in via deposits minus out payments including withdrawals, interest and Premium Bond prizes. It ensures the savings market remains competitive.