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National Savings & Investments (NS&I) quietly cut the eye-watering 5.15 per cent rate it offered to more than a quarter of a million savers on Friday.
The high-yield bond was on sale for just five weeks and was available to the 225,000 savers who purchased Growth or Guaranteed Income Bonds last summer.
NS&I was offering 5.15 per cent interest to customers who fixed the rate for a year or 5.03 per cent to those who preferred monthly interest.
On Friday, the Treasury-backed bank cut the rate to 4.75 percent for those who have not yet transferred their savings into another one-year Guaranteed Growth Bond, or to 4.65 percent for those who want a monthly income.
Shattered: NS&I quietly cut the rate it offered to more than a quarter of a million savers
The 5.15 percent rate turned out to be a surprisingly good deal, with banks rushing to cut their offerings after the Bank of England cut the base rate from 5.25 percent to 5 percent last month.
It was a “get it while you can” rate, which I predicted wouldn’t hold up for long, and it didn’t.
It was on offer from 25 July until 30 August. These one-year NS&I bonds are not generally available for sale. They are only available if you have a Guaranteed Growth Bond or a Guaranteed Income Bond with NS&I that is reaching the end of its term.
In 2023, some 225,000 savers rushed to lock in the interest rate at 6.2 percent for a year and invested around £10 billion in these bonds.
They were on sale from August 30 to October 6, and began serving their one-year term last week.
As current bonds near maturity, the 5.15 percent rate proved attractive to savers who wanted to lock up their money for another year.
NS&I has been writing to savers at least 30 days before their bonds mature offering them the new rate. It started sending letters on July 25 with the 5.15 per cent offer.
If your letter is dated before August 30, you’ll get the highest rate. If it’s dated on or after that date, you’ll get 4.75 percent.
According to my calculations, anyone who bought the bonds last September should be able to get the highest rate.
The new interest rate is disappointing, but not that bad compared to the rest of the market. Banks and building societies have also been cutting their rates.
The highest one-year fixed rate bond comes from Union Bank of India at 5.05 per cent.
Access and Atom offer 5 percent and several banks, including Ford Money, SmartSave, Close Brothers, Cynergy and Investec, pay between 4.8 percent and 4.93 percent.
NS&I is popular because it allows you to save £1m, protected by the government. Under the Financial Services Compensation Scheme, other banks and building societies offer a maximum cover of £85,000.
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