NS&I to cut premium bond rate and other accounts

A._Badger

kinger101 said:

moneysavinghero said:

According to the BBC:

As government spending increased to fund the response to the coronavirus crisis, so did the amount that NS&I was asked to raise for the government. In July, its target was increased from £6bn to £35bn

I guess someone has to pay for all the furloughed people that have been paid to ride their bikes round all day for the last 6 months, and it looks like NS&I savers are the ones to pay it.

Given the cost of COVID to the UK Government is likely to be hundreds of billion pounds, the interest rate would need to be minus several hundred percent if NS&I savers were being the ones to pay. 

The reality is taxpayer is subsidising saving slightly less.

The reality is that the government (on behalf of taxpayer) is paying less to borrow money. Subsidies have nothing whatsoever to do with it.

jamei305

I don't get why they would want massive inflows followed by massive outflows. Surely a more nuanced set of rates and cuts would have smoothly brought them to their funding target within the required time period?

Flugelhorn

I thought I was misreading the e-mail .. duh get the eyes tested. My money is in a DSA to protect it so it is probably apathetic money and will sit there until I can think of something more constructive to do with it. like buy houses for the kids maybe.

Nick_C

I don't think anyone has mentioned that NS&I were due to cut their rates back in May, although not as savagely as the new cuts.  NS&I customers have enjoyed an extra six months of market leading interest rates.

https://www.moneysavingexpert.com/news/2020/02/premium-bond-prize-rate-to-be-cut-to-1-3-/

staggered

Having to keep moving savings as rates continue to be cut is frustrating but, like others have said, not the end of the world. 

From a business point of view, doing what they've done - instantly going from market-leading rates to absolute zero - does seem rather strange.  There will be a lot of customers who will leave NS&I and not be inclined, after receiving such a slap in the face, to ever go back.

Obviously, NS&I are somewhat different from other institutions and there will be wider considerations, someone cleverer than me will presumably know what they are (a forewarning of negative interest rates as someone said earlier?)

polymaff

lhsecons said:

Firstly the rates haven’t just been cut, they’ve been decimated. ...

If only !

bowlhead99

polymaff said:

lhsecons said:

Firstly the rates haven’t just been cut, they’ve been decimated. ...

If only !

The income bonds have gone from paying over 10x base rate to 1/10th base rate, so have lost over 99/100ths of the rate they were paying, somewhat worse than just losing a tenth!

Uxb1

jamei305 said:

I don't get why they would want massive inflows followed by massive outflows. Surely a more nuanced set of rates and cuts would have smoothly brought them to their funding target within the required time period?

As it is in the wacky world of government finances which is akin to a ponzi scheme....
The money from savers that went into to NS&I has already been spent elsewhere in general gov spending.
So now when we all withdraw en-mass from NS&I, HMG is going to have to borrow from somewhere to pay all those withdrawing their monies.

coyrls

Uxb1 said:

jamei305 said:

I don't get why they would want massive inflows followed by massive outflows. Surely a more nuanced set of rates and cuts would have smoothly brought them to their funding target within the required time period?

As it is in the wacky world of government finances which is akin to a ponzi scheme....
The money from savers that went into to NS&I has already been spent elsewhere in general gov spending.
So now when we all withdraw en-mass from NS&I, HMG is going to have to borrow from somewhere to pay all those withdrawing their monies.

But they can borrow at rates a lot less than the NS&I accounts were paying.

Yorkshire_Pud

I expect that banks and building societies didn’t like ns&i with its top interest rates and unlimited protection of funds skewing their market so they had to ‘pretend’ to offer higher rates than they wanted to but with restrictions, not open to new customers, pulling a deal after two days etc. 

Now ns&i have set the bar disengenuously at 0% practically speaking so rates can go where they want from now on. Painful.