NS&I unveils cuts to Premium Bonds and savings deals

Savings institution takes axe to much-loved deals, while wider fixed-rate accounts keep rising.

National Savings & Investments (NS&I) axed many of its best rates today, but average fixed-rate savings deals improved throughout September.

Treasury-backed NS&I has been especially popular with savers during the pandemic, as many of its deals were the best on the market by some margin.

But from 23 November NS&I will cut its Premium Bond rates from 1.4% to 1% and change the odds from December. The odds of a single bond winning will lengthen from 24,500 to one to 34,500 to one.

The savings institution will also cut its Income Bonds easy access deal from 1.16% to 0.01%, its Direct Saver easy access deal from 1% to 0.15%, and its Direct ISA from 0.9% to 0.1%.

NS&I will also trim rates on its Investment Account from 0.8% to 0.01% and its Junior ISA from 3.25% to 1.5%.

However, average fixed savings rates rose in September across all types of set term products, improving on recent declines for savers.

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One year and longer-term fixed bonds, as well as ISAs, all rose month-on-month on average, according to data from Moneyfacts. This is the first time increases have happened across the board since December 2018.

The average one-year fixed rate bond is now 0.65%, up from 0.63% in August. For longer term fixed rate bonds the average has risen to 0.86% month on month. 

Average one-year fixed rate ISA rates are 0.58% compared to 0.56% in August, and for longer term fixed rate ISAs of two years or more rates are up to 0.78% from 0.75% a month ago. 

Rate increases point to banks and building societies competing more for savers’ cash. 

However price changes are coming thick and fast and disappear quickly – the average shelf life of a fixed rate bond has fallen to the lowest number of days in over a decade, according to Moneyfacts.

Rachel Springall, finance expert at Moneyfacts, says:

“There appears to be some signs of life in the savings market as providers have recently improved rates on fixed rate bonds and ISAs and special attention appears to have been focused on the one-year sector. 

“This competition means savers would need to act quickly to take advantage.” 

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The average shelf life for a fixed rate bond has fallen to its lowest point in over a decade, at 36 days, down from 42 a month ago.

However despite the recent improvements these average rates are still around half the level seen at the same time in 2019.

Steven Cameron, pensions director at Aegon, said:

“It’s worth taking stock of savings to make sure you’re not sitting on excess cash that’s earning little or no interest. If you’ve no immediate need for any excess cash, thinking about the long term and either ISAs or pension saving can make a significant difference.”

The number of live savings account options on the market, excluding ISAs, have risen to 1,133 in September, up from 1,083 in August. For ISAs the number of deals has risen from 352 up from 319.