Savers dealt a fresh blow as NS&I slashes rates on four top-paying accounts and cuts Premium Bond prizes
- NS&I will pay £5.7million less in prizes to Premium Bond holders from May
- Number of prizes worth £100 and £50 to be slashed by a third by May
- Rate cuts of 0.25% on Direct Isa and Income bonds and 0.1% on Direct Saver
Millions of savers were dealt a blow today after National Savings & Investments announced rate cuts on four of its top-paying accounts and cuts to Premium Bond prizes.
NS&I's popular Premium Bonds currently pay out tax-free monthly prizes at an equivalent rate of 1.25 per cent a year of the money held in them, but from 1 May that will be reduced to 1.15 per cent.
The cuts will mainly fall on the £50 and £100 prizes, which will tumble from 141,900 per month to an estimated 41,458 - meaning 70 per cent fewer of these prizes will be won.
![Cuts: Interest and prizes will be slashed in the coming months - including on Premium Bonds](http://web.archive.org./web/20170215130702/http://i.dailymail.co.uk/i/pix/2017/02/07/12/0C07AC8600000578-4199472-image-a-22_1486468939920.jpg)
Cuts: Interest and prizes will be slashed in the coming months - including on Premium Bonds
The Government-backed savings organisation, which has 25million customers, has announced it will slash around £5.7million off the prizes it pays out every month to its Premium Bond holders.
The chance of winning any prize will remain one in 30,000, but a readjustment will see returns reduced.
The number of prizes worth £100 and £50 will each fall from 70,950 to 20,729. NS&I will then pay out almost 100,000 more of the smallest prizes worth £25 each month.
The number of £100,000 prizes will drop to two instead of three, but NS&I says the number of top £1million prizes should remain the same - two.
NS&I also followed in the footsteps of big banks as it announced rate cuts of 0.25 per cent on its Direct Isa and Income bonds and a 0.1 per cent cut to its Direct Saver account.
This means its Direct Isa, which almost tops the savings tables by paying 1 per cent, will pay 0.75 per cent interest from May this year.
The same applies to NS&I Income Bonds, which are popular with pensioners as they pay out interest each month rather than every year.
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 |
£25 | 2,076,942 | 2,172,842 |
Total | 2,224,513 | 2,219,493 |
NS&I's Direct Saver easy-access account, currently paying 0.8 per cent, will pay 0.7 per cent from May.
This account is also among the leaders and still much better than the 0.01 per cent offered by a number of big banks.
NS&I said the move follows reductions in interest rates across the savings market, after the Bank of England base rate was cut to 0.25 per cent in August.
In the spring, NS&I will launch Investment Guaranteed Growth Bonds – a new market leading three-year savings Bond – announced by the Chancellor of the Exchequer in the Autumn Statement. The new Bonds will be available for 12 months 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.
NS&I acting chief executive Steve Owen said: '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 per cent HM Treasury guarantee on all holdings, as well as tax-free prizes for Premium Bonds.'
Danny Cox, a chartered financial planner at Hargreaves Lansdown, said: 'This comes as little surprise but this cut in interest rates is another devastating blow for millions of savers and the new launch of Investment Guaranteed Growth Bonds will be of little compensation.
'Ironically, with so little interest on cash for savers, Premium Bonds look more attractive - if your savings are returning basically nothing, you might as well opt for the chance of the jackpot prize.
'NS&I will remain popular for their cast iron security but lower interest rates and rising inflation will test savers' patience and I expect more people to look to the stock markets for some of their cash to improve their long-term returns.'
EDITOR'S FIVE OF THE BEST CURRENT ACCOUNTS
Halifax's Reward account will pay you a £3 monthly bonus and £75 for signing up. You must pay in £750 a month, stay in credit and have two active direct debits.
![Halifax](http://web.archive.org./web/20170215130702im_/http://mailonlinecreative.co.uk/thisismoney/best-current-accounts/logo-haliax.jpg)
First Direct regularly tops polls for customer service. Its First Account offers £125 for joining and has a £250 interest-free overdraft beyond that an authorised overdraft costs 15.9% EAR. You must pay in £1,000 per month.
![First Direct](http://web.archive.org./web/20170215130702im_/http://mailonlinecreative.co.uk/thisismoney/best-current-accounts/logo-first-direct.jpg)
Santander's 123 account pays 1.5% interest on balances up to £20,000 and also gives 1 to 3% cashback on bills. You need to pay a £5 a month fee, pay in £500 a month and have two active direct debits.
![Santander](http://web.archive.org./web/20170215130702im_/http://mailonlinecreative.co.uk/thisismoney/best-current-accounts/logo-santander.jpg)
Nationwide's FlexDirect pays 5% interest on up to £2,500 and has a fee-free overdraft. Watch out these are both for the first year only and you must pay in £1,000 a month.
![Nationwide](http://web.archive.org./web/20170215130702im_/http://mailonlinecreative.co.uk/thisismoney/best-current-accounts/logo-nationwide.jpg)
M&S; Bank's current account has a £50 gift card for joining, plus you get an extra £5 a month top up for the two years. It has no qualifying criteria.
![Marks And Spencers](http://web.archive.org./web/20170215130702im_/http://mailonlinecreative.co.uk/thisismoney/best-current-accounts/logo-m-and-s.jpg)
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