Savers have been left disappointed following news that National Savings & Investment (NS&I) is to cut the interest rates on some of its most popular accounts and reduce the returns payable to holders of Premium Bonds.
NS&I has announced that from 6th June 2016, the chances of winning a prize from Premium Bonds will rise from 1 in 26,000 to 1 in 30,000, with the overall prize fund reducing from £67.5 million to £62.9 million.
Although technically prizes, to allow comparison with more traditional savings accounts, the returns from Premium Bonds are often expressed as a percentage.
Following the change, the anticipated effective rate of interest on Premium Bonds will fall from 1.35% per year to 1.25%.
All prizes will continue to be tax-free.
Interest rate cut
At the same time, NS&I has also announced the interest rates on other popular accounts will be cut from 6th June as follows:
- Direct ISA: 1.25% to 1%
- Direct saver: 1.10% gross per annum to 0.80%
- Income Bonds: 1.25% gross per annum to 1%
- Investment account: 0.75% gross per annum to 0.45% (this change will take effect from 1st July, not 6th June)
NS&I have been forced to cut rates as it is being asked by the Government to raise less in the 2016/17 tax-year than in previous years.
Despite 100% of their capital being protected, savers though naturally be left disappointed by the new rates, at a time when interest rates show now sign of increasing and options elsewhere limited.
We are here to help
If you are worried that following the interest rate cut Premium Bonds may not be the right option for you, we are here to help.
Call Bev or Sarah on 0115 933 8433 or email firstname.lastname@example.org