The Government-backed savings body with 25m customers says the changes will ensure NS&I’s interest rates are “positioned appropriately” against those of its competitors.
The cuts are also being made due to falling gilt yields which are used as a benchmark by NS&I to set rates.
The Direct Saver account will fall from 1% gross to 0.7%, the Investment Account from 0.8% gross to 0.6% gross and Income Bonds from 1.14% gross to 0.7%.
The Premium Bond prize fund rate will drop by 10 basis points from 1.4% to 1.3%. This will reduce the odds of winning from 24,500/1 to 26,000/1.
As a result the number of £100 prizes awarded will drop from 27,221 to 13,448 although there will still be two ‘million pound’ prizes a month and only modest reductions in the number of prizes above £1,000.
Ian Ackerley, NS&I chief executive, said: “These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.”
Details of the rate changes:
Variable rate savings products
|
Product |
Current rate |
Interest rate from 1 May 2020 (change in brackets) |
|
Direct Saver |
1.00% gross/AER |
0.70% gross/AER (-30 basis points) |
|
Investment Account |
0.80% gross/AER |
0.60% gross/AER (-20 basis points) |
|
Income Bonds |
1.15% gross / 1.16% AER |
0.70% gross / 0.70% AER (-45 basis points) |
Premium Bonds (effective from 1 May 2020)
The Premium Bonds prize fund rate will be reducing by 10 basis points, from 1.40% to 1.30%. The odds of any £1 Bond number winning any prize will decrease from 24,500/1 to 26,000/1. The changes will be effective from the May 2020 prize draw.
|
Current prize fund rate |
Current odds |
New prize fund rate (from 1 May 2020) |
New odds (from 1 May 2020) |
|
1.40% tax-free |
24,500 to 1 |
1.30% tax free |
26,000 to 1 |
Value of Premium Bonds prizes
|
Value of prizes |
Number of prizes in February 2020 |
Number of prizes in May 2020 (estimate) |
|
£1,000,000 |
2 |
2 |
|
£100,000 |
6 |
5 |
|
£50,000 |
12 |
11 |
|
£25,000 |
23 |
21 |
|
£10,000 |
59 |
54 |
|
£5,000 |
119 |
106 |
|
£1,000 |
1,984 |
1,857 |
|
£500 |
5,952 |
5,571 |
|
£100 |
27,221 |
13,448 |
|
£50 |
27,221 |
13,448 |
|
£25 |
3,408,513 |
3,262,871 |
|
Total: |
3,471,112 |
3,297,394 |
Fixed term savings products
Customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates and whose investments mature on or before 1 June 2020 and who automatically renew into a new Issue of the same term, will receive the previous, higher interest rate. However, any customers who choose to renew into a new Issue but a term of a different length, will receive the reduced interest rate effective from 1 May 2020.
Current holdings will be unchanged until they mature and customers do not need to take action now. NS&I will write to all holders of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates at least 30 days before the end of their term.
|
Product |
Current rate |
Interest rate from 1 May 2020 (change in brackets) |
|
Guaranteed Growth Bonds (1-year) |
1.25% gross/AER |
1.10% gross/AER (-15 basis points) |
|
Guaranteed Growth Bonds (2-year) |
1.45% gross/AER |
1.20% gross/AER (-25 basis points) |
|
Guaranteed Growth Bonds (3-year) |
1.70% gross/AER |
1.30% gross/AER (-40 basis points) |
|
Guaranteed Growth Bonds (5-year) |
2.00% gross/AER |
1.65% gross/AER (-35 basis points) |
|
Guaranteed Income Bonds (1-year) |
1.20% gross / 1.21% AER |
1.05% gross / 1.06% AER (-15 basis points) |
|
Guaranteed Income Bonds (2-year) |
1.40% gross / 1.41% AER |
1.15% gross / 1.16% AER (-25 basis points) |
|
Guaranteed Income Bonds (3-year) |
1.65% gross / 1.66% AER |
1.25% gross / 1.26% AER (-40 basis points) |
|
Guaranteed Income Bonds (5-year) |
1.95% gross / 1.97% AER |
1.60% gross / 1.61% AER (-35 basis points) |
|
Fixed Interest Savings Certificates (2-year) |
1.30% tax-free/AER |
1.15% tax-free/AER (-15 basis points) |
|
Fixed Interest Savings Certificates (5-year) |
1.90% tax-free/AER |
1.60% tax-free/AER (-30 basis points) |