NS&I has cut rates widely across its fixed and variable savings products and reduced the number of Premium bond prizes with effect from 1 May.

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 

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.  

Value of Premium Bonds prizes 

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.