Planned interest rate reductions on several NS&I deals scrapped
National Savings & Investments (NS&I) has reversed plans to water down Premium Bond rates to support savers during the coronavirus pandemic.
Premium Bonds currently pay an average return of 1.4% a year, and this was due to be watered down to 1.3% from 1 May.
This means the chance of any £1 bond winning a prize will remain at 1 in 24,500 and not change to 1 in 26,000.
NS&I is also not cutting interest on its variable-rate savings deals. It originally planned to trim rates on its Direct Saver account from 1% to 0.7%, its Income Bonds from 1.15% to 0.7% and its Investment Account deals from 0.8% to 0.6%.
The state-backed savings firm is telling customers to ignore any letters or notifications that they have received, but will not say if it will bring back the cuts after the coronavirus outbreak is over.
However, 10 fixed-term product interest rate reductions will go ahead as planned from 1 May.
Guaranteed Growth Bonds and Guaranteed Income Bonds will see cuts of between 0.15 percentage points and 0.40 percentage points.
Two-year Fixed Interest Savings Certificates will drop from 1.3% to 1.15%, while the five-year option will drop from 1.9% to 1.15%.
Customers with these deals that end on or before 1 June 2020 and who automatically renew into a new Issue of the same term will receive the previous, higher interest rate.
The coronavirus pandemic has hit savers hard. The Bank of England cut the base rate last month to a record low of 0.1%, which has sent savings rates plummeting.
The cut will help savers whilst other banks and building societies are slashing rates.
NS&I is urging customers to go online to nsandi.com if they wish to invest or if they need help to manage their savings during the coronavirus pandemic.
An NS&I spokesperson says: "This will help NS&I free up our contact centre capacity for those customers who need to access it most at this time. You should only send NS&I anything by post if you have no other choice."
Laura Suter, personal finance analyst at investment platform AJ Bell, says: “NS&I’s U-turn on interest rates makes sense, and helps savers at a time when other banks are slashing rates and also raises vital money for the Government to fund its Covid-19 rescue efforts."
“By maintaining the current 1% interest rate on the Direct Saver account NS&I is not far off the top paying easy-access savings account, which pays 1.25%, and some will prefer the reassurance of the Government backing of NS&I at the moment.”
NS&I savings rates
Even 0.7% is respectable compared to the derisory rates some banks and building societies are paying. I received a letter about one savings account saying that the interest rate was dropping from 0.1% to 0.05%. The postage probably cost them more than the interest they will pay out.
Good for them it’s time that savers were thought about