Savings giant NS&I pulls some deals from sale and announces rate cuts

September 2, 2019 1:01:29 PM

Savers have been dealt a blow as the Treasury-backed NS&I has announced it is pulling some deals from general sale and imposing rate cuts on selected products.

The provider has withdrawn its one-year and three-year issues of Guaranteed Growth Bonds and Guaranteed Income Bonds from general sale.

At the same time it is imposing a 0.25 percentage point rate cut on its Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates for customers with maturing investments.

NS&I (National Savings and Investments) is an attractive place for many people to hold their cash as it offers 100% security for savings, backed by the Treasury.

When setting savings rates, the provider has a duty to balance the needs of savers and taxpayers, and to help maintain the stability of the broader financial services sector.

NS&I said the changes are due to several factors, including falling rates for similar products offered by competitors.

It said the new rates are still a “fair deal” for customers.

Sarah Coles, a personal finance analyst at Hargreaves Lansdown said: “This is incredibly disappointing for NS&I customers, who’ve been loyal for decades and have come to rely on these bonds.

“There will be savers who don’t want to move, for whom the 100% Government guarantee and the ability to roll deals over are still significant attractions. But better deals are out there, so it’s worth checking what’s on offer.”

Ms Coles continued: “When the Government is weighing up whether NS&I is doing a decent job, it compares how much interest it pays to attract savers against how much it would cost to raise the money by issuing bonds instead.

“At the moment, the enormous uncertainty in the market means investors want bonds, and are willing to accept low yields in return, so raising money by issuing bonds is relatively cheap.

“It means NS&I is under pressure to raise money more cheaply by cutting the rate.”

NS&I’s move means that, for example, the rate on a five-year Guaranteed Growth Bond falls from 2.25% to 2%.

At the end of March, there were 727,000 holders of NS&I’s Guaranteed Growth Bonds, 49,000 of its Guaranteed Income Bonds and 680,000 with Fixed Interest Savings Certificates.

NS&I said that current holdings will be unchanged until they mature.

It will contact bond and certificate holders at least 30 days before their investments reach the end of their term to explain their options.

Customers with the affected products whose deals mature on or before October 5 and who automatically renew into a new deal of the same term will receive the previous, higher interest rate, NS&I said.

But customers who renew into a new issue but choose a term of a different length to the one they had previously will receive the new reduced rates.

Jill Waters, NS&I retail director, said: “It is important that NS&I continues to balance the needs of our savers with taxpayers and the stability of the broader financial services sector.

“Guaranteed Growth Bonds and Guaranteed Income Bonds have been available to new customers for over 20 months at competitive interest rates.

“For those customers with existing investments, the new rates still present a fair deal alongside the benefit of our unique 100% HM Treasury guarantee.”