National Savings & Investments (NS&I) has announced that it intends to dramatically cut the interest it pays on many of its savings accounts in November.
At the same time, NS&I Premium Bond holders will also see their chances of winning a prize reduced from December.
The latest announcement is disappointing to many savers who have turned to NS&I products as a safe haven in an otherwise tumultuous savings market.
To help you see how the changes may affect you, we have summarised them below:
- The Premium Bond prize– From December, the prize rate for Premium Bonds will fall from 1.4 per cent to one per cent. This will mean that the chance of winning will go from one in 24,500 to one in 34,500.
- Variable savings rates– NS&I’s Income Bonds account, is plummeting from 1.16 per cent to just 0.01 per cent AER on 24 November. At the same time the Direct Saver account will drop from one per cent to 0.15 per cent, while the Junior ISA will pay just 1.5 per cent down from 3.25 per cent and the Direct ISA will drop from to 0.1 per cent – 0.8 per cent lower than before.
- Fixed saving rates– A range of fixed saving rate accounts offered by NS&I will see rates fall sharply as well on 24 November, including NS&I’s one-year Guaranteed Growth Bonds, which will drop from 1.1 per cent to just 0.1 per cent AER. The changes to these accounts will only affect accounts that mature and are then renewed.
NS&I has promised to write to all account holders that are affected by these changes, but it makes sense to seek advice if you think you may see a reduction in your savings income.
Alongside the cuts to rates, NS&I is phasing out posting cheques, also referred to as warrants, to prize winners. Instead, it wants bondholders to provide bank details so it can pay the money directly into their account.
This is likely to create issues for those who do not have a phone or online bank account or are unable to use the internet because they cannot currently register for the new payment method if they do not use email.
The new payment method will be phased in from the 1 December prize draw and posted warrants will be phased out entirely by March 2021.