{"id":19967,"date":"2020-03-10T11:54:46","date_gmt":"2020-03-10T11:54:46","guid":{"rendered":"https:\/\/smh.group\/?p=19967"},"modified":"2023-02-15T13:19:48","modified_gmt":"2023-02-15T13:19:48","slug":"national-savings-takes-the-axe-to-interest-rates","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/national-savings-takes-the-axe-to-interest-rates\/","title":{"rendered":"National Savings takes the axe to interest rates"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><strong>National Savings\n&amp; Investments (NS&amp;I) has announced interest rate cuts to most of its\nproducts. <\/strong><\/h3>\n\n\n\n<p>If NS&amp;I did not exist, it is\nhard to imagine that it would be invented now. Once upon a time it was a useful\nway for the government to raise cheap money from the general public, whereas\ntoday it is exactly the opposite. <\/p>\n\n\n\n<p>If HM Treasury needs to borrow \u2013\nas it always does \u2013 it can raise billions by selling government bonds (gilts)\nto institutional investors at an interest rate of under 1%. For example, at the\ntime of writing, the yield on ten-year gilts was just 0.47% \u2013 less than one\nthird of January\u2019s 1.8% inflation rate. <\/p>\n\n\n\n<p>With such low-cost money\navailable in wholesale amounts, it was not surprising that in February NS&amp;I\nannounced a raft of interest rate cuts, all to take effect from 1 May 2020: <\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"\"><tbody><tr><td>\n  <strong>Product<\/strong>\n  <\/td><td>\n  <strong>Current\n  rate<\/strong>\n  <\/td><td>\n  <strong>New rate\n  from 1\/5\/2020<\/strong>\n  <\/td><\/tr><tr><td>\n  Direct Saver\n  <\/td><td>\n  1.00% gross\/AER\n  <\/td><td>\n  0.70% gross\/AER\n  <\/td><\/tr><tr><td>\n  Income Bonds\n  <\/td><td>\n  1.15% gross\/1.16% AER\n  <\/td><td>\n  0.70% gross\/AER\n  <\/td><\/tr><tr><td>\n  Investment A\/C\n  <\/td><td>\n  0.80% gross\/AER\n  <\/td><td>\n  0.60% gross\/AER\n  <\/td><\/tr><tr><td>\n  Premium Bonds\n  <\/td><td>\n  1.40%\n  24,500:1 monthly odds of winning\n  <\/td><td>\n  1.30%\n  26,000:1 monthly odds of winning\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>The premium bond changes mean that from May, 98.95% of all winning draws will be for the minimum prize of \u00a325.<strong> <\/strong>However, as the table shows, the underlying prize interest rate for premium bonds is markedly better than what NS&amp;I is offering on its other variable rate products. Indeed, if your interest income exceeds your available personal savings allowance (\u00a31,000 for basic rate taxpayers, \u00a3500 for higher rate taxpayers) and you have used your \u00a320,000 <strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/financial-services\/investment-options\/isas\/\">ISA allowance<\/a><\/span><\/strong>, the likely meagre returns on <strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/financial-services\/investment-options\/investment-bonds\/\">premiums bonds<\/a><\/span><\/strong> are relatively attractive. <\/p>\n\n\n\n<p>NS&amp;I also lowered the rates on\ntheir fixed rate products \u2013 Guaranteed Growth Bonds, Guaranteed Income Bonds\nand Fixed Interest Savings Certificates. These are not on general sale and are\nonly available for reinvestment of maturing plans.<\/p>\n\n\n\n<p>NS&amp;I\u2019s move can be expected to encourage another round of cuts among deposit-taking institutions, even though the Bank of England rate has remained unchanged since July 2018. If you need income from your savings, then you must either resign yourself to these ultra-low rates or accept some risk to capital. For example, the average yield on UK shares is now about 4.3%. <\/p>\n\n\n\n<p>If you are in a position where you need to seek advice on your <strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/financial-services\/investment-options\/\">personal investment strategy<\/a><\/span><\/strong>, our team of <strong><span style=\"text-decoration: underline;\"><a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/financial-services\/\">Chartered Financial Planners<\/a><\/span><\/strong> can help. Please contact us on <strong>0114 266 4432<\/strong> or <strong><span style=\"text-decoration: underline;\"><a href=\"mailto:info@smhca.co.uk\">info@smhca.co.uk<\/a><\/span><\/strong> to discuss your requirements in more detail.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><em>The value of tax reliefs depends on your individual circumstances.\n<\/em><\/h6>\n\n\n\n<h6 class=\"wp-block-heading\"><em>Tax laws can change. The Financial Conduct Authority does not\nregulate tax advice. <\/em><em><\/em><\/h6>\n\n\n\n<h6 class=\"wp-block-heading\"><em>The value of your investment can go down as well as up and you may\nnot get back the full amount you invested. Past performance is not a reliable\nindicator of future performance. <\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"<p>National Savings &#038; Investments (NS&#038;I) has announced interest rate cuts to most of its products. <\/p>\n","protected":false},"author":4,"featured_media":17130,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1,16],"tags":[77,190,485,239,22,483,206,386,484,486],"class_list":["post-19967","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh","category-financial-services","tag-financial-planning","tag-government","tag-hm-treasury","tag-interest-rates","tag-isa","tag-national-savings-invesments","tag-nsi","tag-personal-investment-strategy","tag-premium-bonds","tag-saving-bonds"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>National Savings takes the axe to interest rates - 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