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Savers have seen no shortage of cuts to interest rates announced by savings account providers this year. It came following the Bank of England Base Rate being reduced to a historic low of 0.1 percent in March this year – where it has since remained.
In February 2020, NS&I had announced cuts to interest rate reductions across its fixed and variable savings products, effective on May 1, 2020.
However, two months later, in response to the coronavirus pandemic, NS&I cancelled the plans.
The rates have since remained unchanged – although this isn’t set to continue for long.
In September this year, NS&I announced rate reductions – with the cuts to come into force on November 24 this year.
It came following months of NS&I featuring among the market-leading easy access savings products for interest rates, according to various financial comparison websites.
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.”
The changes to interest rates come into effect later this month, and some savers could be set to see substantial cuts.
The Direct Saver will reduce by 85 basis points from one percent to 0.15 percent gross/AER and Income Bonds are to drop by 114/115 basis points from 1.15 percent gross/1.16 percent AER to 0.01 percent.
NS&I’s Investment Account product currently pays 0.80 percent gross/AER, reducing by 79 basis points on November 24 to 0.01 percent gross/AER.
The Premium Bonds prize fund rate will reduce by 40 basis points from 1.40 percent to one percent, changing the odds from 24,500 to one to 34,500 to one.
Ahead of the cuts, Kay Ingram, Director of Public Policy at national financial planning group LEBC, has shared her thoughts on the move with Express.co.uk.
Chartered financial planner Ms Ingram said: “I am surprised that the Government allowed NS&I to attract such a large amount of savings by cancelling the rate cut in May only to cut it in November.
“I think it will destroy a lot of people’s faith in NS&I.
“We will be actively encouraging clients to move from the Income Bond and Investment Accounts to better paying options as the derisory interest rate of 0.01 percent is not compensated for by the higher level of security which NS&I is able to offer (£1million rather than £85,000).
“Earlier this year we launched a cash management service as one of our bionic advice services and this can provide a better level of interest, credit rating of banks, a monitor of the £85,000 compensation cap and a constant search for competitive rates.
“It also offers the advantage of a once and done application process for individuals, trustees, attorneys and business accounts.”
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