National Savings Cuts Interest Rates

National Savings & Investments (NS&I) have announced this week that it will reduce interest rates with effect from 24^th November 2020.

The rates will apply to NS&I’s variable rate products including Premium Bonds and some fixed term products.  Premium Bonds prize fund reduced rates will apply from the December 2020 prize draw.

NS&I’s decision will align its savings products with rates offered by the Building Societies and Banks.

Changes to the NS&I products will strike a balance between the interests of taxpayers, savers, and the broader financial services sector.

NS&I’s Net Financing target for 2020 to 2021 in July this year  was revised from £6 billion (+/- £3 billion) to £35 billion (+/- £5 billion), to reflect the Governments funding requirements due to the Covid-19 pandemic.

April-June 2020 – 2021 – Q1 – NS&I received £19.9 billion and delivered £14.5 billion of Net Financing.

July-September 2020-2021 – Q2 - Similar demands for NS&I products remained at the same high level.

Premium Bond prize fund rates will reduce from 1.40% to 1.00% from December 2020 prize draw.  £1 bond number winning any prize the odds will decrease from 24,500/1 to 34,500/1.

Table below shows the value and frequency of Premium Bonds prizes

Table below shows the changes to Variable rate savings products

Fixed term savings products rates will also reduce by between 90 and 115 basis points on all fixed term investments. 

Fixed term investments are only available to customers that want to renew and existing investment when it matures.

NS&I will be writing to all customers that hold Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates at least 30 days before the end of their term, detailing their options.

Investments that mature on or before the 24^th November 2020, customers that automatically renew into a new Issue of the same term will receive the previous higher interest rate.

After this date customers that automatically renew into the same term with receive the new lower interest rate from 24^th December 2020 and customers who choose to renew into a new Issue but a different term length will receive the new reduced interest rate effective from 24^th November 2020.

Customers do not need to act now as current holdings will not be changed until they mature.  

NS&I will write to all holders of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates at least 30 days before the end of their term.