22 Sep 2020

Savers will be hammered by huge reductions in NS&I interest rates

National Savings & investments has announced huge cuts in interest rates on all its products effective from November 2020.

The COVID crisis saw stock markets lurch down in March, but interest rates paid on deposit accounts, including National Savings & Investments, remained unchanged. However, the Bank of England has made it clear that because of the economic slump caused by the virus, official interest rates will remain at near zero for the foreseeable future. And the Treasury, which controls NS&I, has told it to stop pulling in new money – so its interest rates have been slashed.

How NS&I rates will fall

Interest rate now

From November 2020

Premium Bonds


Income Bonds


Direct ISA


Investment account



For many products, these interest rates will be the lowest ever paid by NS&I. And, after a period when NS&I rates were higher than those paid by most major banks, from November NS&I rates will be below the deposit rates paid by the likes of HSBC and Lloyds. Both Income Bonds and the Investment Account will now pay a mere 0.01% annual interest, which for most savers means no interest.

But the obvious answer - switching to a bank account – is unlikely to work. The rates paid by the banks probably won’t stay above NS&I rates for long. The banks are likely to respond to NS&I’s move shortly by cutting their own deposit rates. They don’t need to pay investors to attract deposits when they can borrow at almost no cost in the money markets or from the Bank of England. We guess that once the banks’ rate cuts happen, you may get at best 0.5% from a safe bank deposit account.

What can savers do to get any return on their money? The answer is that they will not be able to do so with safe and secure bank deposits.

We recommend that you discuss your options with one of our advisers. Do not, we urge you, respond to adverts and promotions for high-interest products, which are all too likely to be highly risky or fraudulent.

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