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NS&I savings rates are changing next month – including Income Bonds rate cut to 0.01% | Personal Finance | Finance


Interest rates on savings accounts have been slipping in recent times, with many savings providers announcing cuts following the Bank of England cutting – and subsequently holding – the Base Rate at a historic low of 0.1 percent. The move came as an emergency response to the pandemic, and amid the COVID-19 crisis, there has been speculation that the UK could see negative interest rates.

As such, from December 2020, the odds of any £1 Bond number winning any prize will decrease from 24,500 to one to 34,500 to one.

Another account which is changing is the Income Bonds.

This product has featured at the top of best buy tables comparing interest rates on easy access savings accounts in recent months.

But, from November 24, 2020, the account will reduce by 114/115 basis points from 1.15 percent gross/1.16 percent AER to 0.01 percent gross/AER.

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The Investment Account – currently paying 0.80 percent gross/AER – will reduce by 79 basis points to 0.01 percent gross/AER.

Meanwhile, the Direct Saver, an account which currently offers one percent gross/AER, will be cut by 85 basis points to 0.15 percent gross/AER.

Speaking at the time of the announcement last month, Ian Ackerley, NS&I Chief Executive, said: “Reducing interest rates is always a difficult decision.

“In April we cancelled interest rate reductions announced in February and scheduled for May 1.

“Given successive reductions in the Bank of England base rate in March, and subsequent reductions in interest rates by other providers, several of our products have become ‘best buy’ and we have experienced extremely high demand as a consequence.

“It is important that we strike a balance between the interests of savers, taxpayers and the broader financial services sector; and it is time for NS&I to return to a more normal competitive position for our products.”

Another variable rate savings account included in the cuts is the Junior ISA.

Currently paying 3.25 percent gross/AER, from November 24, it will reduce by 175 basis points to 1.50 percent gross/AER.

The rates offered by NS&I on fixed term products are also being reduced next month, by between 90 and 115 basis points.

The savings provider explained fixed term investments are not currently on general sale, and are only available to customers who wish to renew an existing investment when it matures.

Commenting on the news at the time, Kevin Mountford, co-founder of savings marketplace Raisin UK said: “Whilst we expected that the NS&I rates would drop sometime soon, the extent of the reduction is maybe far greater than anticipated but reflects that fact that the Treasury will have reached its target.

“This spells disappointing news for savers but let’s hope that the rest of the market doesn’t follow suit and adjust rates accordingly.

“This said, the recent surge in consumer credit has helped to boost the competition so it still pays to shop around.”



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