NS&I Product Interest Rates are Reducing - Some as low as 0.01%

National Saving and Investments (NS&I) product are used by a vast amount of people as part of their investment portfolio and saving pots. The NS&I is an HM Treasury backed body that offers a number of different saving options. However, in a surprise announcement this week they have cut their interest to as low as 0.01%.

What does this mean for investors?

Investor in the NS&I products affected will see a drop in their expected returns and struggle to keep up with inflation. Therefore, the buying power of your funds will potentially slowly erode rather than grow.

Premium Bonds

The Premium Bond prize rate will drop from 1.4% to 1% in December[1]. At the moment, the prize rate for Premium Bonds is 1.4% – so each £1 bond has a 1 in 24,500 chance of winning any prize. But from the December 2020 Premium Bond prize draw, the odds will be lowered to 1 in 34,500, with over one million fewer prizes set to be given out in December than in September.

Variable Savings Rates (including ISA’s)

On the 24th November 2020 NS&I's Income Bonds account drop from 1.16% to just 0.01%[2] AER. Example £1000 invested will give you an investment return of a 10p AER. While the Direct Saver account will drop from 1% to 0.15% AER[3]. It's Junior ISA will pay just 1.5% AER, down from 3.25%, while the Direct ISA will drop from 0.9% to 0.1% AER.

Fixed Saving Rate

A range of accounts will see rates drop sharply. For example, NS&I's one-year Guaranteed Growth Bonds will drop from 1.1% to just 0.1% AER[4], while its one-year Guaranteed Income Bonds are being cut from 1.06% to 0.06% AER[5]. However, the rate will drop on renewal and not in your current account term.

NS&I products still might be the most appropriate product for you in your current situation and working with an adviser can help you discover how best to positions your portfolio.

Although, there could be an upside to your current situation. This could be the driver that encourages you to seek professional advice for an adviser. NS&I products still might be the most appropriate product for you in your current situation and working with an adviser can help you discover how best to positions your portfolio. Bluecoat is here to provide our clients with financial advice on many different aspects of financial planning. We have been helping highly successful individuals and families align their values and wealth, to achieve what is critically important to them, for more than a decade.

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[1] https://www.nsandi.com/interest-rates [2] https://www.nsandi.com/interest-rates [3] https://www.nsandi.com/interest-rates [4] https://www.nsandi.com/interest-rates [5] https://www.nsandi.com/interest-rates