NSI interest rates reduction: what does this mean for savers?
Ian Ackerley, NS&I Chief Executive, commented:
“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. It is important that we strike a balance between the interests of savers, taxpayers and the broader financial services sector; and it is time for NS&I to return to a more normal competitive position for our products.”
NS&I have since apologised to customers who have experienced long delays when trying to retrieve their savings following the dramatic reduction in rates.
What does this mean for my savings?
Where the rate of interest is lower than the rate of inflation, the future spending power of your savings will reduce.
With the current ongoing crisis caused by the Coronavirus pandemic, many savers are understandably wary of placing too much in any one bank or building society. Only the first £85,000 of cash held with a UK bank (or banks sharing one banking licence) is protected under the Financial Services Compensation Scheme (FSCS).
Whilst it is convenient to have a current account with a high street bank, larger sums held in longer term savings may provide a better return if you
shop around for a better interest rate. The difference between the best and worst interest rates can be large; Banks have not traditionally rewarded customer loyalty.
How can we help?
If you are concerned about falling returns on your cash savings, now may be a good time to review your investments to ensure you are receiving maximum return. We are able to offer some practical advice on achieving a competitive and tax efficient return and help you to maximise the protection offered by the FSCS.
If you would like any further advice, please get in touch with our team.