NS&I hits savers as it pulls fan-favourite bond

NS&I has served another blow to savers with changes to its bond offerings following last week's announcement it would cut the interest rate paid on Premium Bonds from January 2025. 

NS&I has dropped its five-year bonds from its product options, as well as cutting the interest rates on its newly issued two- and three-year bonds. 

Its two-year Guaranteed Growth Bonds and Guaranteed Income Bonds will now pay 3.6 per cent. Previously, it offered 4.1 per cent and 4.09 per cent respectively. Meanwhile, the three-year Guaranteed Growth Bonds now pays 3.5 per cent, having previously paid 4 per cent. The AER on its three-year Guaranteed Income Bonds has also dropped from 4 per cent to 3.49 per cent.

“NS&I has an obligation not to be too far ahead of its competitors, so cuts right across the savings market were always going to put it under pressure to reduce rates. However, the rates weren’t much to write home about in the first place,” Sarah Coles, head of personal finance at Hargreaves Lansdown said. 

“This is likely to mean the organisation has decided it’s ahead of the game on fundraising, so it can afford to make these products less attractive because it’s not in the business of attracting more cash,” Coles added. 

She urged savers to shop around for the best option. “You can currently make more than 5 per cent on easy access savings, up to 4.8 per cent over one year, and 4.6 per cent over two, three and five years. There’s no need to settle for disappointing rates from anyone – even NS&I,” Coles said.