NS&I savers urged to act now to avoid rate cuts
NS&I announced the rate cuts to the government-backed accounts in September and they come into effect next week on 24 November.
The move will see the interest rate paid on NS&I’s Direct Saver – a previous best buy – reduce from 1% to 0.15%.
Some other NS&I accounts will pay even less interest after 24 November. For example, the rate on its Investment Account, another previous best buy table topper, will go from paying 0.8% to just 0.01%.
The interest rate on Income Bonds will also fall to 0.01% (from 1.16%)
NS&I ISA rates will fall too. The Direct ISA will go from paying 0.9% to 0.1% while the Junior ISA will pay just 1.5%, down from 3.25%.
The rate cuts came as a surprise when they were announced and a blow to savers who have ploughed money into NS&I since the pandemic began. In general, savings rates are at an all-time low, with the Bank of England base rate having sat at 0.1% since March.
NS&I said it was making the cuts to “strike a balance between the interests of savers, taxpayers and the broader financial services sector”.
Savers who tried to move their money out of NS&I last month ahead of the rate cuts faced technical problems and error messages. But NS&I says these are now solved.
A NS&I spokesperson said: “We have experienced high demand for our services and high call levels since March 2020. Currently, for November 2020, the average time that it takes for a customer to speak to a member of our customer services team is 18 minutes.
“We are currently in the process of hiring around 200 additional staff. We expect that this additional resource will improve the speed of our customer service and also give us greater capacity to resolve any complex queries more quickly. We have also utilised additional office space to increase capacity and assist customers across all of NS&I’s operations.”
Premium Bond holders will also have a much lower chance of winning a prize from December, when the prize rate will be cut to 1%.
The number of prizes will reduce from about 3.85 million in September’s draw to an estimated 2.85 million in the December draw.
This means the odds of any £1 Premium Bonds number winning any prize will tumble from 24,500 to one, to 34,500 to one from the December draw.
Where should you move your money to?
Savers looking for an easy access savings account can earn 0.7% AER if they put their money in Saga’s Easy Access Savings Account, or 0.57% if they open a Freedom Savings Account with RCI Bank.
The best one-year fixed rate bond is from Al Rayan Bank and pays 1.08% AER. Rival BLME pays 1% on its one-year bond.