National Savings & Investments has slashed the rate on its one-year fixed rate savings deal.
The Treasury-backed bank is offering new issues of its one-year Guaranteed Growth and Guaranteed Income Bonds, known as British Savings Bonds.
These are open to new customers as well as existing ones whose bonds are maturing – there are 180,000 in this boat.
But in a blow to savers, the rate has been slashed to 4.04 per cent.
In July, NS&I launched issues of the bonds with a rate of 4.18 per cent which already lagged behind the best buys.
It means disappointment for savers looking to lock away their money with NS&I to make the most of interest rates before they are expected to fall.
Hammer blow: NS&I’s new one-year British Savings Bonds pay 4.04% down from 4.18% in July
There are plenty of one-year fixed deals paying more than 4.04 per cent, which you can find on This is Money’s best-buy savings rate tables.
Savers who shop around for a one-year fix will find the best one-year fixed rate accounts pays 4.5 per cent from Chetwood Bank.
A £10,000 lump sum stashed in this account would earn £459.40 in interest, while £10,000 kept in the new NS&I one-year fix would earn £411.57.
Andrew Hagger, founder of personal finance website MoneyComms says: ‘The NS&I one-year rate is disappointing when you look what else is out there.’
‘The top one-year fix with Chetwood Bank pays 4.5 per cent and Atom Bank is paying 4.4 per cent.
‘Even on “no strings” easy-access accounts you can get 4.33 per cent with Kent Reliance and 4.3 per cent with Spring.’
Despite the disappointing rate, those with large sums may still wish to have the security of NS&I’s Treasury-backed guarantee.
You can save £1million in Guaranteed Growth and Income bonds, protected by the Government.
Under the Financial Services Compensation Scheme, other banks and building societies offer £85,000 maximum cover.
Mr Hagger says: ‘The people most reluctant to move from NS&I will be those with six or seven figure balances who would need to split their cash into £85,000 chunks with multiple providers to retain the security on their entire balance.’
What about those coming off the 5.15% fix?
NS&I says existing customers who have already received their 30-day maturity letter will receive the Guaranteed Growth Bonds 4.18 per cent rate quoted in the letter.
However, it’s not clear how many existing savers with the bond have had this letter.
NS&I offered a one-year fix in July 2023, with a 6.2 per cent rate – 225,000 savers opened this, stuffing in £10billion in a stampede for the rate.
Around 80 per cent of savers who had this best ever NS&I fix matured into a new exclusive version a year later offering 5.15 per cent.
But now they face either a 4.18 per cent rate, or the worse 4.04 per cent rate, dependent on whether they have received the letter or not.
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