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Media centre /
Press releaseNATIONAL SAVINGS AND INVESTMENTS RATE CHANGES21 July 2005Falling gilt yields mean reductions to most fixed rate products Significant falls in gilt yields over the last three months have resulted in National Savings and Investments (NS&I) having to reduce the interest paid on most of its fixed rate products. Since 21 April 2005, NS&I has maintained consistent interest rates, despite a fall in gilt yields. However, as the trend has continued rate reductions have become inevitable. NS&I’s variable rate products such as Premium Bonds, the Investment Account and the Easy Access Savings Account remain unchanged. Many other leading savings providers have also reduced rates on some of their savings products over the past three months, including NatWest, HSBC, ING Direct, Alliance and Leicester, Lloyds TSB, and Birmingham Midshires. Fair and consistent In following its interest rate policy of offering fair and consistent rates of return on its fixed rate products, NS&I’s prime influence is the yield on gilts in the short to medium term money markets. Yields on gilts have continued to fall since April 2005 putting pressure on the rates that NS&I offers.
*Time to maturity Index-linked Savings Certificates Despite the rate change, 5-year Index-linked Savings Certificates continue to offer good value with index-linking to the Retail Price Index (RPI) + 1.00% AER** - equivalent to 4.88%* and 6.5%* for basic and higher rate taxpayers. The interest rate on 3-year Index-linked Savings certificates remains unchanged at RPI + 0.95% AER** – equivalent to 4.81%* and 6.42%* for basic and higher rate taxpayers. * Assuming the RPI grows at its current rate of 2.9% for each of the next five years and that current rates of tax remain unchanged. ** AER (Annual Equivalent Rate) is a notional rate that illustrates what the annual rate of interest would be if the interest was compounded each time it was paid. Where interest is paid annually, the quoted rate and the AER are the same. NS&I’s interest rates: key facts
Peter Cornish, head of customer offer for NS&I, said: “The changes to our interest rates reflect movements in the market. Since April, the downward trend on gilts has continued and while we have tried to keep our fixed rates as they were, further falls have demanded that we make these changes. This trend has meant that many of our competitors have also had to reduce rates over the past two to three months. “We always price our offers fairly and consistently in line with movements in the market and, if gilt yields rise again, we would aim to increase our fixed rates.” ENDS NOTES TO EDITORS
1. Tax-free means the return is exempt from UK Income Tax at all rates of taxation. 2. AER stands for Annual Equivalent Rate and enables the comparison of interest rates from different financial institutions and across different products on a like-for-like basis. It shows what the notional annual rate would be if interest was compounded each time it was credited or paid out. Where interest is credited once a year the rate quoted and the AER will be the same. 3. At current tax rates. 4. These figures assume the Retail Price Index rises by its current figure of 2.9% for each of the next five years and that current rates of tax remain unchanged. 5. Rollover rate for withdrawn term(s) 6. Gross means the taxable rate of interest without the deduction of UK Income Tax. For further information, or to arrange an interview, contact the NS&I Media Team.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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