NS&I slashes rates and pulls products
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NS&I has withdrawn a number of products and is cutting rates on others by 0.25 per cent in a bid to limit sales volumes.
The Government-backed savings scheme has had restrictions placed on its sales levels by the Treasury.
NS&I is withdrawing its fixed interest and index-linked savings certificates and cutting rates on its direct saver and income bonds by 0.25 per cent with immediate effect.
It says sales volumes across these products have far exceeded the level anticipated or required by NS&I.
NS&I has agreed a “zero net financing target” with the Treasury for this year - which means it must broadly balance the funds coming in with those leaving, although it is allowed a margin of £2bn either side of this.
Chief executive Jane Platt says: “NS&I has a unique position at the heart of the UK savings sector and we continue to follow a policy of acting transparently and balancing the interests of our savers, the taxpayer and the stability of the wider financial services market.”
She adds: “The volume of sales over the past few months is such that our forecasts show we were at risk of exceeding the top end of the range, so we needed to take action to reduce sales.”
NS&I’s website and call centres stopped taking new sales of savings certificates from 00.00am this morning, and Post Office counter sales have also been suspended with immediate effect.
Postal applications received today will be honoured, but all postal applications received after midnight tonight will be returned to the customer.
The new rates on direct saver and income bonds came into effect from 00.00am this morning.
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Readers' comments (3)
Mike Fenwick | 19 Jul 2010 10:03 am
Why?
Why when there is a supply of savings to our debt ridden country would HMT choose to curtail that supply?
Have they ascertained that there is a sustainable supply of cheaper money from elesewhere - particularly given the levels of current and future Government borrowing?
Why when NS&I can (according to their latest accounts) show that it is more cost effective to use them than sell Gilts - to the tune of £1.6bn in the last year - would HMT choose to ignore cost savings - when we are told that it is the immediate priority?
Excuse my ignorance - does anyone know?
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Anton Gully | 19 Jul 2010 10:21 am
You may have answered your own question, Mike.
Certainly the index linked certificates have been seen as a no-brainer alternative to a savings account for anyone on higher rate tax, and possibly even for standard rate tax payers.
The banks are still getting back on their feet and NS&I wasn't doing anything to help by sucking up all the canny savers.
And then there's the fact that they were over-subscribed and promising to re-pay out (in 3 or 5 years) at interest rates far exceeding what they, as a government, are able to borrow at, so it would actually make more sense for them to borrow on the open market than potentially, and allowing for the tax free status of the ILCs, be paying effectively 6-7 percent interest.
Obviously that's my own simplified few of it. I hope someone with a bit more insight could give a better opinion.
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Exasperated me | 19 Jul 2010 1:13 pm
Where would you put your cash in today's market?
I have seen people in their 70s being sucked into a Santander 'structured product', I asked why they selected it, they said it was because the branch 'suggested it was a good idea because rates are so poor elsewhere' (non-advised by the way), I asked if they understood the risks involved, they said it was 100% safe because of the FSCS... so I said "you wouldn't have put it there if it wasn't for this government guarantee"? They said certainly not. There we go, the compensation schemes distort the market.
I would have told them to stick it in the NS&I but that might be because I don't have a vested interest!
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