National Savings & Investments has slashed payouts on accounts and Premium Bonds dealing a blow to millions of savers.
The biggest cuts will be on bonds. Income Bonds will fall from 1.15% to 0.7%, three-year Guaranteed Growth Bonds will fall from 1.7% to 1.3%, and three-year Guaranteed Income Bonds will drop from 1.65% to 1.25%.
The number of monthly winners of £50 and £100 Premium Bond prizes is to halve from 1 May, and the total number of tax-free Premium Bond payouts is to fall by more than 170,000 to 3.29 million.
The Guardian says this means the odds of any £1 bond number winning any prize will decrease from 24,500/1 to 26,000/1 from the May 2020 draw onwards.
“This is another kick in the teeth for savers,” said Baroness Altmann, the former pensions minister.
She told The Times: “Many people, especially older generations, have used NS&I all their lives and know it is safe, so they want to keep their money in those accounts… It seems the government is sanctioning rate cuts in NS&I that will allow banks to continue to offer very poor rates without driving more savers away.”
Ian Ackerley, chief executive of the NS&I, said: “Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors.”
Sarah Coles, personal finance analyst at financial provider Hargreaves Lansdown, told The Sun: “It’s not all the NS&I’s fault. Its hands are tied, because it needs to offer value for money compared to government debt, and rates are so ridiculously low at the moment that the only way to compete is by offering something horribly uninspiring to savers.”
However, she adds, savers “don’t need to sit back and take this” but should use it as an incentive “to check out the competition and make… money work harder”.
Comparison tools, such as Moneyfacts, can help you discover the best interest rate for your cash.
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