The Premium Bonds prize rate is set to fall to one per cent, state owned savings bank National Savings & Investments (NS&I) has announced.
The decision will be another blow for savers across the UK, after savings rates dropped during the coronavirus pandemic. Interest plunged to its lowest level on record during the Covid-19 crisis, with the average account paying just 0.27 per cent.
NS&I says it is one of the largest savings organisations in the UK, with 25 million customers and more than £179 billion invested.
Ian Ackerley, the NS&I chief executive, said, “Reducing interest rates is always a difficult decision.
“In April we cancelled interest rate reductions announced in February and scheduled for 1 May. Given successive reductions in the Bank of England base rate in March, and subsequent reductions in interest rates by other providers, several of our products have become ‘best buy’ and we have experienced extremely high demand as a consequence.”
How much is the cut?
Savers with NS&I’s popular direct saver account will receive a cut in rates from one per cent to 0.15 per cent. The return on income bonds will drop from 1.15 per cent to 0.01 per cent. The pay-out on its Investment Account will also fall from 0.80 per cent to 0.01 per cent.
Rates on the direct ISA will fall from 0.9 per cent to 0.1 per cent. The junior ISA remains the best paying account for savers, but will also drop from 3.25 per cent to 1.5 per cent.
The cuts announced by NS&I are deeper than the cuts planned by the government-backed organisation earlier in the year. They were put on hold as the pandemic hit.
When will the cuts take place?
From 24 November 2020 returns on the direct saver, investment account, income bonds and ISAs will drop.
Changes to Premium Bond cash prizes
Holders of NS&I Premium Bonds will have a much lower chance of winning a prize from December. The prize rate will be cut from 1.4 per cent to one per cent.
For bond holders, that means the odds of any one £1 number winning a prize will decrease from 24,500-1 to 34,500-1.
Holders will still have two chances to win the £1 million jackpot each month, but the number of £100,000 prizes will fall from seven to four.