NS&I Income Bonds

harsh_but_fair

Speculation they may cut rates - only speculation of course.

https://www.dailymail.co.uk/money/saving/article-8452059/NS-reveals-savers-cost-887m-year-borrowing-costs-low.html

Stubod

.it's in the Mail so it must be right....

RG2015

Stubod said:

.it's in the Mail so it must be right....

In February they planned to reduce the rate from 1.15% to 0.70%. In April they cancelled the rate reduction in order to support customers during the Covid emergency.

It is likely that they will reduce the rate within the next couple of months.

You can mock the Mail (as I often do for their poor financial journalism) but that does not change the validity of this particular report.

jimbow25

harsh_but_fair said:

Speculation they may cut rates - only speculation of course.

https://www.dailymail.co.uk/money/saving/article-8452059/NS-reveals-savers-cost-887m-year-borrowing-costs-low.html

Stubod said:

.it's in the Mail so it must be right....

I'm no fan of the Mail but the rationale behind the speculation is entirely sound.
NS&I do not usually sit at the top of the best buy accounts - they know they can be a home for people's money at any time due to the security offered - indeed they were spectacularly uncompetitive during and after the financial crisis a decade ago if I recall correctly.
Remaining this rewarding doesn't make financial sense for them in terms of a business that supports the government. At this point they are paying to keeping some savers relatively happy.

polymaff

jimbow25 said:

 indeed they were spectacularly uncompetitive during and after the financial crisis a decade ago if I recall correctly.

5+%, tax-free - spectacularly uncompetitive?

Cool it. We know that NS&I are currently offering higher-than-expected rates. We know why. We know that the Government can get lower rates elsewhere on its borrowings - and that this is not something new.

We are, after all, MSE, not the press ..

harsh_but_fair

I posted the link although along with others I am not a particular fan of the mail although I have to say in fairness I am quite a fan of their financial section which I find contains some very good articles - unlike of course the main body of the paper...

blue_max_3

hoc said:

Do you have just the one linked current account to both? I like the idea of using DS to more quickly access IB. Does this work in both directions, taking money out of IB as well as paying in faster than otherwise? Do you do bank transfer from current account or debit card payment into DS? This thread has contrasting opinions on which is better. Card payment seems more "secure" to some due to confirmation and appearing instantly (interest is earned immediately although funds can't be accessed until they clear and become available), bank payments may not show up for a few days but become available quicker than card payments. For truly instant it would appear to be debit card into DS and then into IB but I suppose DS won't allow transfer into IB until the payment has actually cleared which takes several days.

The income bond account is linked to the direct saver (interest is paid to the DS). The direct saver is linked to my bank account. To withdraw from my income bond account, I transfer to the direct account and from there to my linked bank account. This shows in my bank account next day. And the reverse, I bank transfer from my current account into my direct saver (shows next day). And then, if over £500, to my income bond account (happens instantly).

bowlhead99

jimbow25 said:

Remaining this rewarding doesn't make financial sense for them in terms of a business that supports the government. At this point they are paying to keeping some savers relatively happy.

One of the challenges for a government is to keep the population happy. 

People with savings are upset that the bank interest rates are on the floor, which the banks blame on B of E base rates, which in the popular consciousness is indistinct from government policy even though technically the central bank is independent.

Perhaps while people know that you can get a nicer rate at NS&I, which is part of government rather than a 'thieving money-grabbing bank', the savers (including the 'grey vote' who are likely to have accumulated some savings and rely on getting a good interest rate) will think that although they don't like what the government are doing, at least the government are helping them out with an offer of more than 1% instead of the less than 1% which you would get from a high street bank or building society, so they are not being totally abandoned after all.

So, paying to keep some savers relatively happy rather than throwing them to the wolves of capitalism, may be useful for government - and in the grand scheme of things is somewhat less costly than the tens of billions a month they spent to support furloughed workers etc.

NS&I does have tens of millions of customer accounts and it will help those customers sentiment towards the government if they feel they are getting a better rate than other organisations would give them.  Some customers will of course still rant that it is terrible that they are only getting a paltry rate, because they remember getting 5% in the good old days, but 1%+ is ten times what many of the high street banks are paying, so may help keep some goodwill towards the government even if it is only subconscious.  So, I'm not sure it's true that it 'doesn't make financial sense' for a government-supporting entity to do it.

colsten

blue_max_3 said:

hoc said:

Do you have just the one linked current account to both? I like the idea of using DS to more quickly access IB. Does this work in both directions, taking money out of IB as well as paying in faster than otherwise? Do you do bank transfer from current account or debit card payment into DS? This thread has contrasting opinions on which is better. Card payment seems more "secure" to some due to confirmation and appearing instantly (interest is earned immediately although funds can't be accessed until they clear and become available), bank payments may not show up for a few days but become available quicker than card payments. For truly instant it would appear to be debit card into DS and then into IB but I suppose DS won't allow transfer into IB until the payment has actually cleared which takes several days.

The income bond account is linked to the direct saver (interest is paid to the DS). The direct saver is linked to my bank account. To withdraw from my income bond account, I transfer to the direct account and from there to my linked bank account. This shows in my bank account next day. And the reverse, I bank transfer from my current account into my direct saver (shows next day). And then, if over £500, to my income bond account (happens instantly).

You can link the IB account directly to any current account, so that the monthly interest gets paid directly into the current account straight away. You can still transfer to and from other NS&I accounts, such as the DS or PBs.

labp04

bowlhead99 said:

but 1%+ is ten times what many of the high street banks are paying, 

And somewhere around twice the current rate of inflation. Long may it last!