I fear the time has come to ditch NS&I before a fares avalanche occurs, says SYLVIA MORRIS
The grinchers at National Savings & Investments (NS&I) have been busy handing out huge cuts to interest rates and the prize fund in a desperate bid to curb the wall of money closing in.
And don’t rule out further cuts if the money continues to flow in. Even with the current rates, I would seriously consider staying with NS&I.
Yesterday, NS&I announced major cuts to fixed-rate guaranteed growth and guaranteed income bonds.
It comes hot on the heels of last week’s cuts to the Premium Bond prize fund – the third this year – alongside further cuts to the popular, easy-to-access Direct Saver and Income Bonds.
Huge amounts of money were poured into premium bonds in October, with a huge £1.2 billion.
That kind of money puts NS&I at risk of exceeding the £9 billion target the government has asked it to meet in the current financial year, which runs to the end of March.
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Cuts: National Savings & Investments has announced significant cuts to its fixed-rate guaranteed growth and guaranteed income bonds
There is some wiggle room: it could be £4 billion above or below this target, for a maximum total of £13 billion.
The government-run savings provider has breached last year’s £7.5bn limit, which then-chairman Ed Anderson said was ‘disappointing’. It asked to raise a minimum of £4.5 billion and a maximum of £10.5 billion. It ended at £11.3 billion.
If it yields too much, it could cost taxpayers more than necessary to raise the money and disrupt the rest of the savings market.
NS&I has an advantage over its competitors because all money deposited there is guaranteed by the government.
By mid-year in September, NS&I says it has attracted £3.3 billion from savers – on track to raise £6.6 billion this year if things stay the same.
It doesn’t say how much came in in the third quarter of the year, but it appears to be awash with cash.
However, the latest figures from the Bank of England show that £2.1 billion went to NS&I in October, up from £65 million in September.
If the country continued to digest this inflated figure for the rest of the year, it would bring in almost £13 billion, the most it was aiming for.
It all started with a reduction in the premium rate for premium bonds, announced on October 22, from 4.4 percent to 4.15 percent. It came after savers raised £1.2 billion in the month.
We don’t know to what extent this has deterred savers, but obviously not enough, because last week there was another discount. From the drawing in January, the rate will be reduced to 4 percent.
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