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NS&I reduces interest rates

NS&I has today announced that it is reducing interest rates on four of its variable rate products. This follows reductions in interest rates across the savings market after the Bank of England’s reduction of the base rate by 25 basis points, to 0.25% in August 2016.

Variable rate changes will apply to Premium Bonds, Direct ISA, Direct Saver and Income Bonds, coming into effect on 1 May 2017.

In the spring, NS&I will also be launching Investment Guaranteed Growth Bonds – a new market leading 3-year savings Bond – announced by the Chancellor of the Exchequer in the last Autumn Statement. The new Bonds will be available at nsandi.com for 12 months from spring 2017 with an indicative interest rate of 2.20% gross/AER. The precise rate will be confirmed nearer to launch. The Bonds will be open to people aged aged 16 and over and will have a minimum investment of £100 and a maximum investment of £3,000.

Steve Owen, Acting Chief Executive, NS&I, said

“We have taken the time to absorb the impact of the Bank of England base rate reduction and subsequent changes across the savings market. The new rates reflect current market conditions and allow us to continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.

“We appreciate that savers will be disappointed, but we believe that the new rates present a fair offer to customers, who will continue to benefit from our 100% HM Treasury guarantee on all holdings, as well as tax-free prizes for Premium Bonds.

“In addition, in the spring, customers will also have the opportunity to invest in a new market-leading 3-year savings Bond, Investment Guaranteed Growth Bonds, which will be open to people 16 and over who can invest a maximum of £3,000.”

Variable rate savings products

 
Product Current rate New rate Effective from
Direct ISA 1.00% tax-free/AER 0.75% tax-free/AER 1 May 2017
Direct Saver 0.80% gross/AER 0.70% gross/AER 1 May 2017
Income Bonds 1.00% gross/AER 0.75% gross/AER 1 May 2017

 

Premium Bonds

Current prize fund rate Current odds New prize fund rate (from 1 May 2017) Odds (from 1 May 2017)
1.25% tax-free 30,000 to 1 1.15% tax-free 30,000 to 1

 

February 2017 May 2017 (estimate)
Total value of prizes £69,516,050 £63,810,400
Total number of prizes 2,224,513 2,219,493
Prize band split:
Higher value(£5,000+)
Medium value (£500+)
Lower value (£25+)
5% of prize fund
5% of prize fund
90% of prize fund
5% of prize fund
5% of prize fund
90% of prize fund

 

Value of prizes Number of prizes in February 2017 Number of prizes in May 2017 (estimate)
£1,000,000 2 2
£100,000 3 2
£50,000 6 6
£25,000 11 9
£10,000 31 23
£5,000 58 47
£1,000 1,390 1,276
£500 4,170 3,828
£100 70,950 20,729
£50 70,950 20,729
£50 70,950 20,729
£25 2,076,942 2,172,842
Total 2,224,513 2,219,493

Notes to Editors

  1. NS&I is one of the largest savings organisations in the UK, offering a range of savings and investments to around 25 million customers. All products offer 100% capital security, because NS&I is backed by HM Treasury.
  2. Tax-free means that the interest or prizes are exempt from UK Income Tax and Capital Gains Tax.
  3. Gross is the taxable rate of interest without the deduction of UK Income Tax.
  4. AER stands for Annual Equivalent Rate and enables the comparison of interest rates from different financial institutions and across different products on a like-for-like basis. It illustrates what the annual rate of interest would be if the interest was compounded each time it was paid. Where interest is paid annually, the quoted rate and the AER are the same.
  5. Information on our products can be found here.
  6. For further information please contact the NS&I media team.

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