Media centre /
Press release
NATIONAL SAVINGS AND INVESTMENTS RATE CHANGES
19 August 2004
- Base rate increase: NS&I’s variable rates rise
- Falling gilt yields mean reductions to fixed rates
National Savings and Investments (NS&I) is changing the interest rates on its fixed and variable rate savings products.
Following the increase in the Bank of England base rate from 4.50% to 4.75% on 5 August, interest rates on NS&I’s variable rate products will rise, including the rate used to calculate the Premium Bond prize fund rate.
However, the fall in gilt yields means the interest rates on NS&I’s fixed rate products, such as Savings Certificates, will be reduced. As the yield on gilts – which NS&I uses as one of its benchmarks when setting fixed rates – has fallen, this means NS&I’s fixed rates will reduce.
John Prout, NS&I’s sales director, said: “With present market conditions as they are, where the base rate has risen but gilts are falling, we are able to increase our variable rates, which is good news for people who have money in our Easy Access Savings Account, for example. The downward trend in gilts means some of our fixed rates must be reduced.
“However, 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.”
Premium Bonds
The latest increase in the base rate means the tax-free prize fund rate on Premium Bonds will rise on 1 December from 3.00% to 3.20%, the fifth increase in 2004. Currently, the rate is 2.80% and will rise to 3.00% on 1 October, as a result of the Bank of England’s rate increase on 10 June.
NS&I estimates the total value of prizes awarded will have risen by nearly 50% from £41.5 million in January 2004 to £61.8 million by October 2004.
The odds of winning a prize with any single £1 bond will remain at 24,000 to 1 as they will be from September. However, there will be increases in the number of prizes ranging from £100 to £50,000. Those who own £30,000 in Premium Bonds could, with average luck, win 15 prizes a year.
NS&I’s interest rates: key facts
- When interest rates are set on tax-free products, NS&I takes into account the amount of tax that HM Treasury would have received if the product was taxable. In addition, NS&I does not lend money, so cannot subsidise savings rates by charging high rates of interest on credit/borrowing
- NS&I does not price discriminate between different channels – the return on products is the same no matter where 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, and 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 and NS&I does not try to buy market share.
ENDS
NOTES TO EDITORS
|
New Tax-free Rates1
(Fixed and Variable Products) |
|
|
|
New issues from 19 August 2004 unless otherwise stated |
Rate p.a./ AER2
(change in brackets) |
Equivalent grossed up rate for basic rate taxpayers3 |
Equivalent grossed up rate for higher rate taxpayers3 |
|
2-year Fixed Interest Savings Certificates 28th issue
Guaranteed compound rate over 2 years |
3.35% (-0.15%)
|
4.19% |
5.58% |
|
5-year Fixed Interest Savings Certificates
78th issue
Guaranteed compound rate over 5 years |
3.45% (-0.20%)
|
4.31% |
5.75% |
|
3-year Index-linked Savings Certificates
89h issue |
Index-linking + 1.10% (-0.15%) |
5.13%4 |
6.83%4 |
|
5-year Index-linked Savings Certificates
36th issue |
Index-linking + 1.25% (-0.10%) |
5.31%4 |
7.08%4 |
|
Children’s Bonus Bonds
16th issue
Guaranteed compound rate over 5 years, including fifth anniversary bonus |
4.45% (-0.25%) |
n/a |
n/a
|
|
Cash mini ISA / Tessa-only ISA
(new rate effective from 1 September 2004) |
4.45% (+0.25%) |
5.56% |
7.42% |
|
Premium Bonds
(new rate to calculate the monthly prize fund - effective from 1 December 2004) Odds: 24,000-1 |
3.20% (+ 0.20%) |
4.00% |
5.33%
|
|
New variable gross rates5 |
|
|
|
|
Rate p.a. (change in brackets) |
AER2 |
|
Easy Access Savings Account
(new rates effective from 1 September 2004)
£50,000+
£25,000 - £49,999
£10,000 - £24,999
£5,000 - £9,999
£1,000 - £4,999
£100 - £999 |
4.55% (+0.25%)
4.30% (+0.25%)
4.05% (+0.25%)
3.80% (+0.25%)
3.50% (+0.25%)
2.00% (+0.25%) |
4.55%
4.30%
4.05%
3.80%
3.50%
2.00% |
|
Income Bonds (new rates effective from 30 September 2004)
£25,000+
Under £25,000 |
4.45% (+0.25%)
4.20% (+0.25%) |
4.54%
4.28% |
|
Investment Account (new rates effective from 1 September 2004)
£50,000+
£25,000 - £49,999
£10,000 - £24,999
£5,000 - £9,999
£500 - £4,999
Under £500 |
4.15% (+0.25%)
3.80% (+0.25%)
3.60% (+0.25%)
3.40% (+0.25%)
3.30% (+0.25%)
3.25% (+0.25%) |
4.15%
3.80%
3.60%
3.40%
3.30%
3.25% |
|
Ordinary Account (new rates effective from 1 September 2004)
£500+
Under £500
This account closed on 31st July 2004. |
1.20% (+0.25%)
1.10% (+0.25%) |
1.20%
1.10% |
|
Treasurers Account (new rates effective from 1 September 2004)
£100,000+
£25,000 - £99,999
£10,000 - £24,999 |
4.15% (+0.25%)
3.80% (+0.25%)
3.60% (+0.25%) |
4.15%
3.80%
3.60% |
|
New fixed gross rates5 |
|
|
|
New issues from 19 August 2004 |
Rate p.a.
(change in brackets) |
AER2 |
|
1-year Pensioners Guaranteed Income Bonds
Series 26 |
4.35% (-0.20%) |
4.44% |
|
2-year Pensioners Guaranteed Income Bonds
Series 32 |
4.50% (-0.20%) |
4.59% |
|
5-year Pensioners Guaranteed Income Bonds
Series 41 |
4.60% (-0.30%) |
4.70% |
|
1-year Fixed Rate Savings Bonds
Issue 28
Interest is paid net
£50,000+
£20,000+
£500+
monthly interest option
Interest is paid net
£50,000+
£20,000+
£500+ |
4.50% (-0.20%)
4.30% (-0.20%)
4.15% (-0.20%)
4.40% (-0.20%)
4.20% (-0.20%)
4.05% (-0.20%) |
4.50%
4.30%
4.15%
4.49%
4.28%
4.13% |
|
3-year Fixed Rate Savings Bonds
Issue 22
Interest is paid net
£50,000+
£20,000+
£500+
monthly interest option
Interest is paid net
£50,000+
£20,000+
£500+ |
4.80% (-0.20%)
4.60% (-0.20%)
4.45% (-0.20%)
4.70% (-0.15%)
4.50% (-0.20%)
4.35% (-0.20%) |
4.80%
4.60%
4.45%
4.80%
4.59%
4.44% |
|
5-year Fixed Rate Savings Bonds
Issue 20
Interest is paid net
£50,000+
£20,000+
£500+
monthly interest option
Interest is paid net
£50,000+
£20,000+
£500+ |
4.80% (-0.25%)
4.60% (-0.25%)
4.45% (-0.25%)
4.70% (-0.20%)
4.50% (-0.25%)
4.35% (-0.25%) |
4.80%
4.60%
4.45%
4.80%
4.59%
4.44% |
|
Capital Bonds
Series 20 |
4.70% (-0.30%) |
4.70% |
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 3% for each of the next five years and that current rates of tax remain unchanged.
5 Gross means the taxable rate of interest without the deduction of UK Income Tax.
For further information, or to arrange an interview, contact the media relations team.
| Mark Brooks |
020 7348 9301 |
mark.brooks@nsandi.com |
| Jonathan Akerman |
020 7348 9433 |
jonathan.akerman@nsandi.com |
| Wendy Franklin |
020 7348 9449 |
wendy.franklin@nsandi.com |
| Elen Thomas |
020 7348 9654 |
elen.thomas@nsandi.com |
| Out of hours |
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www.nsandi.com |
|
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