NS&I is changing interest rates on products including Premium Bonds this month

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The Bank of England Base Rate has been maintained at a historic low of 0.1 percent since March this year, with the emergency cuts having been made as a temporary response to the coronavirus pandemic. The decision has prompted a number of banks and building societies to announce cuts to a number of variable rate products.

While this year has seen NS&I offering a market-leading rate of 1.15 percent gross/1.16 percent AER, it will reduce by 114/115 basis points later this month – instead offering 0.01 percent gross/AER.

That’s not all, as NS&I will be reducing rates on its variable rate products, as well as some fixed term products.

Furthermore, the Premium Bonds prize fund rate will be reduced, affecting the odds of winning.

The changes will take effect from November 24 this year.

As such, November 2020 marked the final month in which the Premium Bonds prize draw odds remain at the current rate.

Ian Ackerley, NS&I Chief Executive, said in September: “Reducing interest rates is always a difficult decision.

“In April we cancelled interest rate reductions announced in February and scheduled for May 1.

“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.”

Variable rate savings products

Currently: 1.00 percent gross/AER

From November 24 2020: 0.15 percent gross/AER (-85 basis points)

Investment Account

Currently: 0.80 percent gross/AER,

From November 24 2020: 0.01 percent gross/AER (-79 basis points)

Income Bonds

Currently: 1.15 percent gross/1.16 percent AER

From November 24 2020: 0.01 percent gross/0.01 percent AER (-114/115 basis points)

Direct ISA

Currently: 0.90 percent gross/AER

From November 24 2020: 0.10 percent gross/AER (-80 basis points)

Junior ISA

Currently: 3.25 percent gross/AER

From November 24 2020: 1.50 percent gross/AER (-175 basis points)

The Premium Bonds prize fund rate currently stands at 1.40 percent, and will reduce by 40 basis points to one percent on November 24.

As such, this will affect the Premium Bonds December 2020 prize draw.

At this moment in time, the odds of winning per £1 Bond number is 25,000 to one.

It will change to 34,500 to one from December 2020.

In September 2020, the number of prizes won was a total of 3,856,040.

However, NS&I estimates this will reduce in December 2020 to 2,850,256.

Fixed term savings products

Rate reductions for NS&I’s fixed term investments will take effect on November 24, with reductions between 90 and 115 basis points.

Fixed term investments are not on general sale and they are only available to customers who wish to renew an existing investment when it matures.

NS&I says current holdings will be unchanged until they mature.

Guaranteed Growth Bonds (1-year)

Currently: 1.10 percent gross/AER

From November 24, 2020: 0.10 percent gross/AER (-100 basis points)

Guaranteed Growth Bonds (2-year)

Currently: 1.20 percent gross/AER

From November 24, 2020: 0.15 percent gross/AER (-105 basis points)

Guaranteed Growth Bonds (3-year)

Currently: 1.30 percent gross/AER

From November 24, 2020: 0.40 percent gross/AER (-90 basis points)

Guaranteed Growth Bonds (5-year)

Currently: 1.65 percent gross/AER

From November 24, 2020: 0.55 percent gross/AER (-110 basis points)

Guaranteed Income Bonds (1-year)

Currently: 1.05 percent gross / 1.06 percent AER

From November 24, 2020: 0.06 percent gross / 0.06 percent AER (-100 basis points)

Guaranteed Income Bonds (2-year)

Currently: 1.15 percent gross / 1.16 percent AER

From November 24, 2020: 0.11 percent gross / 0.11 percent AER (-115 basis points)

Guaranteed Income Bonds (3-year)

Currently: 1.25 percent gross / 1.26 percent AER

From November 24, 2020: 0.36 percent gross / 0.36 percent AER (-90 basis points)

Guaranteed Income Bonds (5-year)

Currently: 1.60 percent gross / 1.61 percent AER

From November 24, 2020: 0.51 percent gross / 0.51 percent AER (-110 basis points)

Fixed Interest Savings Certificates (2-year)

Currently: 1.15 percent tax-free/AER

From November 24, 2020: 0.10 percent tax-free/AER (-105 basis points)

Fixed Interest Savings Certificates (5-year)

Currently: 1.60 percent tax-free/AER

From November 24, 2020: 0.50 percent tax-free/AER (-110 basis points)

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