Savings giant NS&I’s target for raising money has been increased to up to £40 billion, as the Government looks to boost its cash flow to help it deliver Covid-19 support measures.
NS&I (National Savings and Investments), which provides products such as Premium Bonds, is backed by the Treasury.
Finance experts said savers will be “breathing a huge sigh of relief” as there were concerns NS&I could attract too much cash for its target and be forced to slash its savings rates to make itself less competitive.
The savings provider’s “net financing target” represents its contribution to Government financing. It measures the net change in NS&I funds and looks at the flow of cash coming in from deposits, for example, minus outgoings such as withdrawals and Premium Bond prize payouts.
NS&I’s target for 2020-21 was previously set at £6 billion, within a range of £3 billion up to £9 billion.
This central target has been increased by £29 billion to £35 billion, within a range of £30 billion up to a maximum of £40 billion, to reflect Government finance requirements arising from Covid-19.
The new target may still be subject to further revision during the year, depending on the Government finance requirement.
The Treasury said an “unprecedented” package of measures is being provided to support people and businesses through the economic disruption caused by coronavirus.
NS&I also published unaudited figures on Thursday for the first quarter of the financial year, April to June 2020-21.
It delivered £14.5 billion of net financing in the first three months of the year.
Offering attractive rates to savers helps NS&I, which has 25 million customers, to increase its net financing.
In February, NS&I announced a raft of savings rates cuts, including making the Premium Bonds prize fund rate less generous.
But in April, it said many of the planned interest rate reductions on NS&I would not now go ahead. It said the rates would remain unchanged to ensure savers are supported during the coronavirus pandemic.
We paid out over 3.7 million prizes worth more than £106 million in the July Premium Bonds draw. Check the prize checker app or the online prize checker to see if you have won this month: https://t.co/kqVov24yEC pic.twitter.com/5MyoF7wu7s
— nsandi (@nsandi) July 6, 2020
The Premium Bonds prize fund rate remained at 1.40% as a planned reduction of 10 basis points to 1.30% was also cancelled.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Savers will be breathing a huge sigh of relief at the news that NS&I is going to be there for them through the crisis.
“NS&I has been single-handedly holding up rates in the easy access savings market. Its income bonds have topped the charts, offering 1.16% – which is far and away the best rate on the market. Other banks will compete for short periods at a time, but nobody else has the capacity to soak up the huge sums of money we put away during lockdown.
“The worry was that NS&I might be forced to cut savings rates, and that other competitive rates on the market would follow suit.
“These competitive rates have attracted a huge amount of cash. Overall, NS&I increased the cash it held by £14.5 billion in the first three months of the year.
“Given that it was only aiming to raise a maximum of £9 billion during the entire year the… worry was that it would attract too much cash, and be forced to slash rates.”