Yahoo Finance NS&I premium bond odds lengthen as impending rate cuts loom
Almost a third of National Savings and Investment (NS&I) savers (31.7%) said they were unaware of the impending rate cuts taking place on 24 November, meaning that around 8 million of NS&I’s 25 million customers could be in for a surprise.
In September, the government-backed institution announced it was lowering interest rates in light of the economic environment and as a reflection of the Bank of England’s rate cut in March.
It said its easy-access account will fall to 0.01%, with the odds of winning a premium bonds prize also lowering to just 1% as it cuts its prize fund.
The odds of winning on Premium Bonds, currently 24,500 to 1 will lengthen to 34,500 to 1 from December.
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NS&I's direct saver will also drop from 1% to 0.15 while its investment account will fall from 0.80% to 0.01%. NS&I's Junior ISA, which is available up until the age of 16, will also fall to 1.5% from 3.25%.
In a survey conducted by findoutnow on behalf of investment platform AJ Bell, 43% of savers said they intended to move their cash elsewhere, with only 57% saying they were going to stay put.
Banks and building societies look set to be the main beneficiaries of the NS&I exodus, with some 25% saying they were looking to switch. The research surveyed 500 NS&I savers on 17 November.
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Laith Khalaf, financial analyst at AJ Bell said: “Millions of NS&I savers could be in for a nasty shock when they wake up and smell the swingeing rate cuts coming their way.
“Until now, NS&I rates hadn’t been lowered to reflect the Bank of England’s rate cut in March, so their products were starting to stand out like a sore thumb in best buy tables.
“The result has been a huge influx of money into NS&I, so it’s no surprise to see the organisation trying to turn the taps off, as they are extremely close to the £40bn ($54bn) maximum the Treasury has asked them to raise this year.”
He added: “Getting savers engaged with their cash accounts when rates are so low is incredibly difficult, so it’s credit to NS&I that over two thirds of their savers are in fact aware the cuts are coming.”
The move would mean large sums of money would be leaving the Treasury-backed bank.
While Premium Bonds still look fairly competitive, around £25bn of savings will now attract virtually nil interest.
NS&I is currently around £3bn ahead of its target, and £8bn ahead of the bare minimum it needs to raise for the Treasury.
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