Raft of NS&I rate cuts to hit ISAs and Premium Bonds
National Savings & Investments (NS&I) is cutting interest rates on five of its variable rate products including its Premium Bonds, Direct ISAs and Income Bonds.
The rate changes will also apply to Direct Saver and Investment Account products.
Rates on Direct ISAs and Income Bonds will fall from 1.25% to 1% from 6 June 2016. The rate on its Direct Saver will be 0.8% from 1.1% from 6 June and the Investment Account rate will drop from 0.75% to 0.45% from 1 July 2016.
NS&I is also cutting the Premium Bond prize fund rate to 1.25% from 1.35% from 1 June 2016. The odds of each £1 Bond number winning will lengthen to 30,000-to-one from 26,000-to-one.
The total value of Premium Bond prizes will fall to an estimated £62.9m for the month of June, down from £67.6m in March 2016.
Jane Platt, chief executive of NS&I, said: “It is always a difficult decision to reduce rates, but downwards movements in interest rates across the cash savings market mean that our rates have risen in the competitor tables.
“NS&I aims to strike a balance between the needs of savers, taxpayers and the stability of the broader financial services sector, while raising the required level of Net Financing for the Treasury. These changes will allow us to manage demand in order to achieve our new Net Financing target, and deliver positive value to taxpayers.”
NS&I is also slashing rates on its Index-linked Savings Certificates, which are not currently on sale but are available to customers who already hold the products and want to renew.
The bonds guarantee to beat the Retail Price Index (RPI) measure of inflation each year plus an additional return. This extra return is currently 0.05% but is falling to 0.01% for customers who renew products which mature on or after 28 March 2016.
Platt added: “The majority of the new interest rates on offer are either at, or above, average market rates. We believe they present a fair offer to customers, who will also continue to benefit from our 100% HM Treasury guarantee on all holdings, as well as tax-free prizes for Premium Bonds.”