Investors who cashed-out equity positions in favour of National Savings & Investments (NS&I) have been dealt a hammer blow.
It has been announced that from 24 November the state-owned savings bank will cut interest payments on many of its savings accounts, with the direct saver rate falling by 85 basis points to a paltry 0.15 per cent. The cuts will bring the rates in line with savings products offered by UK banks and building societies.
Not only that, but the chances of winning anything through Premium Bonds (the effective interest rate) will lengthen appreciably, with the total number of prizes falling from 3,856,040 to 2,850,256.
| Product | Current interest rate | Interest rate from 24 November 2020 (change in brackets) |
| Direct Saver | 1.00% gross/AER | 0.15% gross/AER (-85 basis points) |
| Investment Account | 0.80% gross/AER | 0.01% gross/AER (-79 basis points) |
| Income Bonds | 1.15% gross/1.16% AER | 0.01% gross/0.01% AER (-114/115 basis points) |
| Direct ISA | 0.90% gross/AER | 0.10% gross/AER (-80 basis points) |
| Junior ISA | 3.25% gross/AER | 1.50% gross/AER (-175 basis points) |
| Source: NS&I | ||
In April, NS&I helped to stabilise savings rates by reversing cuts to many of its accounts, but this latest decision removes a relatively safe haven, or at least reduces incentives in terms of exemptions on UK Income Tax and Capital Gains Tax. The bank has to balance the rate paid to savers with the cost to the Treasury, but the magnitude of the cuts are still surprising even though inflows from savers have been extremely high.
