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Press release

NATIONAL SAVINGS AND INVESTMENTS RATE CHANGES

18 August 2005

Fall in base rate means reduction to variable rate products

National Savings and Investments (NS&I) is changing the interest rates it offers on all of its variable rate savings offers.

Following a reduction in the Bank of England base rate on 4 August 2005 from 4.75% to 4.50%, interest rates on NS&I’s variable rate offers will be reduced.  NS&I has not reduced rates on any of its variable rate products since July 2003, when the Bank of England last announced a reduction to the base rate. 

The base rate change has affected savings providers across the board, with most providers announcing a rate reduction to their savings products over the past month. 

Interest rates on all NS&I variable rate products will come into effect on 1 September 2005, with the exception of Income Bonds which will take effect from 6 September 2005.

Premium Bonds

The new Premium Bond prize fund rate will be 3.00%. NS&I will continue to give away over one million tax-free prizes each month, including two £1 million prizes. The odds of winning a prize will remain the same at 24,000 to 1, meaning that someone with the maximum investment in Premium Bonds of £30,000 could, with average luck, expect to win 15 tax-free prizes a year.

Fair and consistent

In following its interest rate policy of offering fair and consistent rates of return on its variable rate products, NS&I’s prime influence is the Bank of England base rate. A fall in the base rate has put pressure on NS&I to reduce the interest rates on its variable rate products.

NS&I’s interest rates: key facts

• NS&I does not lend money, so cannot subsidise savings rates by charging high rates of interest on credit/borrowing. When interest rates are set on tax-free products, NS&I takes into account the amount of tax that the Exchequer would have received if the product had been taxable.
• NS&I does not price discriminate between different channels – the return on products is the same no matter where, when or how they were bought.  NS&I’s sales channels include telephone, online, by post or at any of the UK’s 15,000 Post Office™ branches
• NS&I’s accessibility is not limited by geography or location, as the same rates are available throughout the UK
• NS&I’s fixed rate products are on sale everyday throughout the year – many providers offer fixed rate products for limited periods during the year
• NS&I prices its products to give fair, consistent and value for money returns.  NS&I does not try to buy market share, saving the need for customers to spend time shopping around for short-term headline rates

Peter Cornish, head of customer offer for NS&I, said: “The changes to our interest rates reflect the fall in the Bank of England base rate.  This has affected banks and building societies across the board, with many of our competitors reducing rates to their savings products over the past month.

”We always price our offers fairly and consistently and if the base rate rises again, we would aim to make appropriate increases.”

New variable rates                                                              

Gross Rates¹	Rate p.a. (change in brackets)	AER²
Income Bonds (new rates effective from 6 September 2005) Under £25,000 £25,000+	3.95% (-0.25%) 4.20% (-0.25%)	4.02% 4.28%
Investment Account (new rates effective from 1 September 2005) £50,000+ £25,000+ £10,000+ £5,000+ £500+ Under £500	3.85% (-0.30%) 3.50% (-0.30%) 3.30% (-0.30%) 3.10% (-0.30%) 3.00% (-0.30%) 2.95% (-0.30%)	3.85% 3.50% 3.30% 3.10% 3.00% 2.95%
Treasurers Account (new rates effective from 1 September 2005) £100,000+ £25,000+ £10,000+	3.90% (-0.25%) 3.55% (-0.25%) 3.35% (-0.25%)	3.90% 3.55% 3.35%
Easy Access Savings Account (new rates effective from 1 September 2005) £50,000+ £25,000+ £10,000+ £5,000+ £1,000+ £100+	4.30% (-0.25%) 4.05% (-0.25%) 3.80% (-0.25%) 3.55% (-0.25%) 3.25% (-0.25%) 1.75% (-0.25%)	4.30% 4.05% 3.80% 3.55% 3.25% 1.75%

 

Tax-free rates³	Rate p.a. (change in brackets)	AER²
General Extension Rate (new rate effective from 1 September 2005)	2.04% (-0.24%)	2.04%
ISA (Cash mini and Tessa accounts.  New rate effective from 1 September 2005)	4.20% (-0.25%)	4.20%
Premium Bonds (New rate effective from 1 September 2005)	3.00% (-0.25%)	3.00%

 

1. Gross means the taxable rate of interest without the deduction of UK Income Tax.

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. Tax-free means the return is exempt from UK Income Tax at all rates of taxation.

Media team
NS&I has a number of spokespeople available for interviews and our experienced radio team is available via our ISDN line: 020 7602 4522.

The numbers below are for media use only. Customers wishing to contact NS&I can find details here.

Gareth Headon		020 7348 9494
		gareth.headon@nsandi.com
Gill Stephens		020 7348 9449
		gill.stephens@nsandi.com
Iman Asante		020 7348 9301
		iman.asante@nsandi.com
Monica Del-Villar		020 7348 9654
		monica.del-villar@nsandi.com
ISDN for interviews		020 7602 4522
Out of hours		All numbers above diverted to staffed mobile phones

 

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