• NS&I scraps planned rate cuts to Income Bonds, Investment Accounts and Direct Saver accounts
• Premium Bond prize fund rate to stay at 1.4%
• Income Bonds now market-leading postal account
• Government is raising money to fund its Covid-19 spending
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“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. Savers will no longer see the rates cut on Premium Bonds, Income Bonds, Investment Account or Direct Saver accounts.
“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. While Premium Bonds aren’t a guaranteed rate, and you might walk away with no interest, the ‘average interest rate’ of 1.4% tax-free now makes it a market leader, ahead of other easy-access savings accounts. The 1.16% rate paid on the Income Bond accounts, which are available by post, now makes it the top-paying postal account in the market.
“The Government had previously announced plans to cut the target amount it wanted NS&I to raise in the current tax year, to reflect the fact that it could borrow money cheaper elsewhere – which would have meant further rate cuts for savers. But even though that announcement only came out last month the landscape looks dramatically different now. With billions spent on funding businesses and individuals throughout the current crisis the Government needs to use all its routes to raise money.
“Like many businesses NS&I is suffering from staff shortages and a flood of enquiries from customers, meaning some customers are suffering long wait times to withdraw their money or open new accounts, with some people waiting up to a month to get their cash back. This is frustrating for those who need access to the money now as a result of their finances being hit by Coronavirus. NS&I is encouraging those customers who can do their transactions online to do so, in order to free up the phone lines and postal service for others.”
