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Media centre /
Press releaseNATIONAL SAVINGS AND INVESTMENTS RATE CHANGES20 May 2006National Savings and Investments (NS&I) is changing the interest rates it offers on all of its fixed rate savings offers and on Premium Bonds and the Investment Account (see Appendix 1). New issues of fixed rate products, such as NS&I’s tax-free* inflation–beating Index-linked and Fixed Interest Savings Certificates, will offer higher rates of return when they go on sale from 20 May 2006. These increases range from 0.15%p.a. to 0.40%p.a. Inflation-Beating Savings The new three-year Index-linked Savings Certificates will offer an interest rate equivalent to 6.08%p.a. for higher rate taxpayers or 4.56%p.a for basic taxpayers, for example, if the current rate of RPI (2.6%) stays the same for three years. The five-year Issues offer an interest rate equivalent to 6.16%p.a and 4.62% p.a respectively, for example, if the current rate of RPI stays the same for five years. Anyone aged seven or over can invest from £100 up to £15,000 per Issue. Premium Bonds The Premium Bond tax-free* prize fund rate will fall from 3.00%p.a. to 2.95%p.a. from 1 June 2006. The odds of winning a prize will remain at 24,000-1 therefore meaning that someone with the maximum investment in Premium Bonds of £30,000 could, with average luck, still expect to win 15 per year. All prizes are free of UK income tax and capital gains tax. There will still be over 1.27 million of prizes awarded each month and the monthly prize fund total will fall from £76.6 million in May to an estimated £75.4 million in June. Rates on the Investment Account, a passbook account, have been reduced by 0.05% across its tiers. The change in the rates offered are due to changing market conditions and costs. The fixed-rate increases are due to upward movements in gilt yields. The change in Premium Bonds is due to the increasing costs of operating Premium Bonds including tax foregone. Peter Cornish, marketing director at NS&I, said: “We will always aim to provide consistent and fair returns, and because of further increases in the market we can again increase the rates on our fixed rate products. “Although we have had to pass on a small increase in costs to Premium Bond customers there are still over 1.27 million prizes awarded each month and for June these will be worth over £75 million.” ENDS Notes to editors * Tax-free means the return is exempt from UK income tax and capital gains tax at all rates of taxation. 1. National Savings and Investments is one of the largest savings organisations in the UK which offers a range of savings and investments products. It has around 26 million customers and £73 billion invested. All products offer 100% security, because they are backed by HM Treasury.
APPENDIX 1NEW FIXED RATES
NEW VARIABLE RATES
1. Tax-free means the return is exempt from UK income tax and capital gains 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 income tax rates 4. These figures assume the Retail Price Index rises by its current figure of 2.6% for each of the next three years and that current rates of tax remain unchanged. 5. These figures assume the Retail Price Index rises by its current figure of 2.6% for each of the next five years and that current rates of tax remain unchanged. 6. Gross means the taxable rate of interest without the deduction of UK Income Tax.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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