In February, the government’s savings arm confirmed a number of changes for savers from 1 May.

However, in a bid to support savers during the coronavirus pandemic, it has confirmed it will cancel interest rate cuts on variable rate products, though reductions on fixed term products will still go ahead.

The 20+ million Premium Bonds holders were expecting the odds of winning to fall from 24,500-to-one to 26,000-to-one but this will no longer go ahead.

The prize fund rate was also due to fall from 1.40% to 1.30% tax-free but will remain at the upper level. Premium Bonds aren’t like normal savings accounts as they don’t pay interest. Instead the interest that should be paid (currently 1.40%) is used to fund a monthly prize draw.

Here are the cancelled changes to variable rate savings products:

The Direct Saver will remain at 1% (0.70%), the Investment Account will stand at 0.80% (0.60%) and Income Bonds will offer 1.15% (0.70%).

Fixed term savings products

The changes to fixed term savings products will be effective from 1 May:

• 1-year Guaranteed Growth Bonds: from 1.25% to 1.10%
• 2-year Guaranteed Growth Bonds: from 1.45% to 1.20%
• 3-year Guaranteed Growth Bonds: from 1.70% to 1.30%
• 5-year Guaranteed Growth Bonds: from 2% to 1.65%
• 1-year Guaranteed Income Bonds: from 1.20% to 1.05%
• 2-year Guaranteed Income Bonds: from 1.40% to 1.15%
• 3-year Guaranteed Income Bonds: from 1.65% to 1.25%
• 5-year Guaranteed Income Bonds: from 1.95% to 1.60%
• 2-year Fixed Interest Savings Certificates: from 1.30% to 1.15%
• 5-year Fixed Interest Savings Certificates: from 1.90% to 1.60%.

However, NS&I confirmed that customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates and whose investments mature on or before 1 June 2020 and who automatically renew into a new issue of the same term, will receive the previous, higher interest rate.

But for those who choose to renew into a new issue but with a different term will receive the reduced interest rate effective from 1 May.

‘Raises vital money for government to fund Covid-19 rescue efforts’

Laura Suter, personal finance analyst at investment platform AJ Bell, said NS&I’s U-turn on interest rates makes sense, and helps savers at a time when other banks are slashing rates. It is also raising vital money for the government to fund its Covid-19 rescue efforts.

She said: “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.”

NS&I urges customers to go online at nsandi.com if they want to invest money or need help to manage their savings during the Covid-19 pandemic. This is because it is currently receiving more calls than usual and it is taking longer than normal to help customers.