National Savings and Investments (NS&I) has announced that it is cutting the rates on a range of its products in another blow for the UK’s savers.
NS&I is the government’s own savings organisation and has to use rates that "reflect what is available elsewhere in the market".
Savers have faced massive cuts to rates as base rate remains at a record low into a 5th year and Bank of England policies such as quantitative easing and the Funding for Lending scheme (FLS) hit savings rates and have led to a reduction in the number of savings accounts, including ones with bonus rates.
This means the NS&I has been paying rates amongst the highest in the country.
NS&I said that the rate on its Income Bonds will be cut to 1.25 per cent from 1.75 per cent, its Direct Saver will fall to 1.1 per cent from 1.50 per cent and its Direct ISA will see the rate cut to 1.75 per cent from 2.25 per cent. It said the reductions “reflect the lower interest rates now available elsewhere”.
NS&I said that the decision had come after one of its regular reviews of the savings market and that it “sets its interest rates to balance the interests of its savers, taxpayers and the stability of the wider financial services sector.”
The changes will take effect from 12th September 2013 and that it will wrote to customers to let them know at least 60 days before this.
Jane Platt, Chief Executive, NS&I, said: "Rates across the savings market have fallen over recent months and to ensure we continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial sector, we have taken the difficult decision to reduce the rates on our Direct ISA, Direct Saver and Income Bonds accounts."
Over 25 million people have a combined £100 billion saved with NS&I. These savings do not have a cap on the amount that is covered should a bank or building society go bust, unlike most savings accounts that are guaranteed up to £85,000 under the Financial Services Compensation Scheme (FSCS).
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