NS&I cut interest rates – what it means for your savings

National Savings and Investments (NS&I), who have over 25 million customers, have cut the interest rates on their savings accounts significantly and reduced some of the prizes available on premium bonds.

This raises the question of the value of putting money away in these accounts in real terms.


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National Savings and Investments (NS&I) has announced it will be reducing interest rates on their savings products. These will come into effect from 1 May. The cuts are applied across a few different products, with the return on its Income Bond being reduced by 39%.

You will see the full range of reductions in the chart below.

The Direct Saver rates are being reduced to 0.70% p.a which when inflation is taken into account means savers are actually losing money in real terms.

With the current inflation rate at 2.7% (RPI Jan 2020) this means that the real value of savings is MINUS 2%!

Product Current rate (AER/Gross*) New rate from May
Direct Saver 1.00% 0.70%
Investment Account 0.80% 0.60%
Income Bonds 1.15% 0.70%
Source: NS&I


In addition to the cuts, the odds of winning a Premium Bond prize will decrease from a 1 in 24,500 chance to 1 in 26,000. There will still be the same number of £1,000,000 prize winners, but every other prize value will see a drop in the number of winners. That means there’s likely to be over 173,000 less prizes:

Value of prizes Number of prizes in Feb Number of prizes from May (estimated)


2 2
£100,000 6 5
£50,000 12 11
£25,000 23 21
£10,000 59 54
£5,000 119 106
£1,000 1,984 1,857
£500 5,952 13,448
£100 27,221 13,448
£25 3,408,513 3,262,871
TOTAL 3,471,112


 Source: NS&I


What it means for Savers

Clearly the 25 million people who have these types of accounts are seriously reducing the real value of their money, and perhaps mistakenly think that they are protecting the capital value of their investments. As described above though, if inflation is at the current rates for the foreseeable future then their cash is reducing in value in real terms.

NS&I are not alone. Savers across the country have been reeling from letters from their Banks and Building Societies informing them that the interest rates on their accounts are being reduced or the ceiling on which interest is payable has been lowered – in some cases by as much as 50%)

Get your cash working harder

It doesn’t have to be like that though as there are many ways that you can look at growing your savings whilst still protecting them from market volatility, yet achieving a much better return which is very likely to grow in real terms.

If you have savings in cash either in NS&I, or even in banks or building societies who offer similar rates, then contact the team at Markland Hill Wealth to discuss the range of options we have which can help you grow your cash in REAL TERMS.