Advertisement

Image of Ella Mower

Ella Mower

Senior Content Writer
Published: 22/10/2024
Putting savings into a jar

The Government-backed brand also revealed the Premium Bond prize fund rate is set to be slashed.

 

In yet another blow to savers, National Savings and Investments (NS&I) today announced it will be lowering the rates paid by its Direct Saver and Income Bonds with effect from next month. This will mark the first time in four years the Government-backed brand has reduced interest rates on these easy access accounts.

It comes as returns on variable savings products steadily declined in the wake of August’s reduction to the Bank of England base rate. With figures released last week by the Office for National Statistics (ONS) revealing inflation eased beyond economists’ expectations in September, many believe further cuts to the UK’s central interest rate are imminent and are considering the potential implications on the savings market.

“As the savings market continues to change, we need to lower the rates on some of our products to help us meet our Net Financing target, while also ensuring we continue to balance the interest of our savers, taxpayers and the broader financial services sector,” Andrew Westhead, Retail Director at NS&I, explained.

As of 20 November, this will see NS&I’s Direct Saver and Income Bonds both offer 3.75% AER, each having paid 4.00% AER since May 2024.

Meanwhile, the State-owned bank also unveiled new issues of its two-year Guaranteed Growth and Income bonds; these fixed bonds go on sale today but, compared to the previous issues, they offer lower rates of 4.10% AER and 4.02% AER, respectively.

 

Seasonal Banner Seasonal Banner

Should savers look elsewhere?

Although the Direct Saver and Income Bonds currently offer above-average returns, accounts from NS&I tend to appeal to savers more greatly for the safety and security afforded to them by being uniquely backed by HM Treasury. 

Nevertheless, better rates are available from less familiar names. Chip, for instance, leads our easy access savings chart, with its Chip Easy Access Saver (powered by ClearBank) paying 5.00% AER when considering a 0.93% bonus for the first 12 months. Alternatively, fellow digital provider, Sidekick Money, offers 4.89% AER on balances between £1 and £85,000 with its Sidekick Instant Access Cash Reserve 1 (inclusive of a 0.55% bonus for 12 months).

Funds in these accounts are covered by the Financial Services Compensation Scheme (FSCS) up to £85,000 per banking licence.

 

Related Guides:

 

However, as these accounts all offer variable rates which are subject to change with little warning, those wanting guaranteed returns and who don’t need access to their cash may instead wish to consider a fixed bond.

At the time of writing, the best returns in this sector sit at 5.00% AER – offered by Union Bank of India (UK) Ltd’s one-year Union Premier Bond and Fixed Rate Deposit. But, with average fixed rates at their lowest in over a year, and this corner of the market also influenced by wider economic circumstances, competitive deals can quickly be repriced or withdrawn. Savers may therefore need to act fast to take advantage of an attractive offer.

 

Compare the best savings rates

Our savings charts are regularly updated throughout the day to display the best fixed, easy access and notice rates on the market.

For more information on these accounts, be sure to read our weekly savings roundup.

Premium Bonds prize fund rate set to be slashed

Alongside these changes, NS&I also revealed it will lower its Premium Bond prize fund rate to 4.15% from December’s draw. On average, this will see £4.15 paid out in prizes for every £100 of Premium Bonds purchased, as opposed £4.40, currently.

These prizes range anywhere from £25 to £1 million but aren’t guaranteed; in fact, NS&I is reducing the odds of winning to 22,000 to 1, also as of the December draw (previously 21,000 to 1).

“Even with the changes, we’re still expecting to pay out over 5.7 million prizes worth over £435 million in the December Premium Bonds draw,” reassured Westhead.

That being said, savers may want to consider whether they’d get better returns on their hard-earned cash with a traditional savings account or ISA by consulting our guide: Are premium bonds better than savings accounts?

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.