NS&I set to reduce savings rates | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 18/02/2020

The state-owned savings bank National Savings & Investments (NS&I) has announced that it is planning to reduce rates across its fixed and variable savings products from 1 May 2020.

NS&I is planning to make the following cuts to its variable rate accounts:

  • Direct Saver will be cut from its current rate of 1.00% gross to 0.70% gross, a fall of 0.30%.
  • Investment Account will be cut from its current rate of 0.80% gross to 0.60% gross, a fall of 0.20%.
  • Income Bonds will be cut from its current rate of 1.15% gross to 0.70%, a fall of 0.45%.

Fixed rate accounts

As well as this, it is planning to make the following changes to its fixed rate accounts:

Product Current rate Interest rate from 1 May 2020
Guaranteed Growth Bonds (1 year) 1.25% gross 1.10% gross
Guaranteed Growth Bonds (2 year) 1.45% gross 1.20% gross
Guaranteed Growth Bonds (3 year) 1.70% gross 1.30% gross
Guaranteed Growth Bonds (5 year) 2.00% gross 1.65% gross
Guaranteed Income Bonds (1 year) 1.20% gross 1.05% gross
Guaranteed Income Bonds (2 year) 1.40% gross 1.15% gross
Guaranteed Income Bonds (3 year) 1.65% gross 1.25% gross
Guaranteed Income Bonds (5 year) 1.95% gross 1.60% gross
Fixed Interest Savings Certificates (2 year) 1.30% gross 1.15% gross
Fixed Interest Savings Certificates (5 year) 1.90% gross 1.60% gross

Premium Bonds changes

NS&I is also planning to make changes to its Premium Bonds prize draws.

The current prize fund rate of 1.40% tax-free will be reduced to 1.30% tax-free, meaning the current odds of 24,500 to 1 will rise to 26,000 to 1.

This means that the number of Premium Bonds prize winners will also fall as estimated below:

Value of prizes Number of prizes in February 2020 Number of prizes in May 2020 estimate
£1,000,000 2 2
£100,000 6 5
£50,000 12 11
£25,000 23 21
£10,000 59 54
£5,000 119 106
£1,000 1,984 1,857
£500 5,952 5,571
£100 27,221 13,448
£50 27,221 13,448
£25 3,408,513 3,262,871
Total: 3,471,112 3,297,394

Why is the NS&I reducing rates?

The NS&I has announced that it made the decision to reduce rates due to a fall in gilt yields and the aim of rebalancing the needs of its savers, taxpayers and the broader market stability. Ian Ackerley, NS&I Chief Executive, said: “Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors. These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.

“We believe our new rates offer our customers a fair return and the assurance of the 100% HM Treasury guarantee on all their holdings with NS&I.”

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