NS&I to cut premium bond rate and other accounts

eskbanker

MiserlyMartin said:
the government ought to be doing much more to help hard pressed ordinary savers

At whose expense (and why)?

bowlhead99

MiserlyMartin said:

bundoran said:

When I saw that the rate on Income Bonds was being cut from 1.15% to 0.01% I couldn't believe my eyes and thought it must be a typo. 😬

Me too! I got the email this morning. 0.01%  - that really is taking the P. Hey, why not go the whole hog and make it 0.00%,  as this is just an insult

It's like going out for an expensive meal and you are stingy or don't like the waiter so you give him only a 10p tip, or you write your will leaving a pound to an estranged relative. It sends the message that you didn't accidentally forget about them, it's simply that you just didn't want to give them very much at all. 

Likewise NS&I are technically giving you something - they are 'income bonds' after all, so one would expect an income - but they really don't want your money so they are only going to pay you the very smallest positive rate that fits into the summary box on their documentation.

ratechaser

bowlhead99 said:

coachman12 said:

Laurence_Harvey said:

Thanks so much for that very detailed summary. I never knew it was so complex.

So, is it a yes, or a no ? 

It's actually not that complex at all.  And you are not alone in asking "is that a yes or a no" -----
 many members are bound to ask the same simple question after an over-complicated and lengthy post, so you have every valid reason to have to ask your question. All the best with the new homes you find for your NS&I savings, Lawrence ( and,BTW, of all your talented performances, I liked your role in "The Manchurian Candidate" more than any other    ).

Although i accidentally forgot to quote the post I was replying to, the response was following up a query from RG2015 who was wondering what rate of return might be realistically obtained and what level of holding would constitute a 'large holding' having seen polymaff's comment that 0.9% was pretty much guaranteed for 'large holders'; there was also some uncertainty on whether that 0.9% rate was with reference to the 'old' or 'new' odds from December draws onwards (there would be more certainty of a large holder getting at least that much with the old odds than there is with the new ones).

As 'how much return might I get' is not really 'a yes or a no' question, it would not expect to get a yes or no answer.

What I did explain was that the rate you would expect to receive in any given year would be lower than the headline prize pool rate, with examples of how you could reasonably have expected 1.2% as a maxed-out £50k holder under the old odds, but practically speaking may well be some lower percentage as a £2k holder because the most likely outcome is that you do not win a prize at all during the first year.  I then explained how the realistic proposition of 1.2% achievable under the old headline of 1.4% prize rate would drop to more like 0.85-0.9% under the new lower rates from the December draw - with small holdings likely less; and why.

I'm not sure if you are suggesting that it's 'not complex' because the maths can easily be worked through if one gets their head around it, or because it's not complex for you because you have no problem committing the max £50k to this product and don't really care that a small holding of £1-2k is likely to yield 0% most years because you don't find yourself in those circumstances.

For some people reading the thread it would be complex because they don't have £50k and so would only be taking a relatively small amount of the allowed commitment (perhaps transferring a few thousand out of their old NS&I accounts whose rates will drop so drastically), and trying to compare what they would realistically be able to get from PBs with what might be achieved on other financial accounts (with a further complication that the returns from those other accounts may or may not be taxable depending on personal circumstances). This gives some complexity to their planning, when they are trying to be a 'money saving expert' but don't have the luxury of a large amount of money to save.

I don't think the sort of question people would have when coming to this thread, of 'what will I probably get from a Premium bond account, so that I can compare with my other options' is a non-complex (yes or no) question, and so my answer wasn't short. There are of course odds calculators online (MSE has one) where people could while away their afternoon experimenting with numbers in a formula engine. But 'over-complicated and lengthy post' is probably needlessly critical, given it went some way to articulate the differences between the prize pool rate and the realistic rate of return for a typical year with a large holding or a small holding and the reasons for those, before and after the rate cut; that sort of reply wouldn't be a one-liner. Perhaps it is an answer to a question nobody was asking, though some readers found it useful.

I fear you may have fallen for Coachman's cunningly laid trap 

MiserlyMartin

eskbanker said:

MiserlyMartin said:
the government ought to be doing much more to help hard pressed ordinary savers

At whose expense (and why)?

I already explained why. But seeing as expense is no object.... eg insanely generous furlough schemes, unlimited NHS budget, help to eat out.... and a second lockdown to continue the madness, it seems the skys the limit on what they will spend. Why not help savers, its a fraction of the other expenditure. They seem to think its ok, we can just print.

MiserlyMartin

bowlhead99 said:

It's like going out for an expensive meal and you are stingy or don't like the waiter so you give him only a 10p tip, or you write your will leaving a pound to an estranged relative. It sends the message that you didn't accidentally forget about them, it's simply that you just didn't want to give them very much at all. 

Likewise NS&I are technically giving you something - they are 'income bonds' after all, so one would expect an income - but they really don't want your money so they are only going to pay you the very smallest positive rate that fits into the summary box on their documentation.

In that case why not make it 0.000001%. They can make the box bigger easy enough.

zagfles

MiserlyMartin said:

eskbanker said:

MiserlyMartin said:
the government ought to be doing much more to help hard pressed ordinary savers

At whose expense (and why)?

I already explained why. But seeing as expense is no object.... eg insanely generous furlough schemes, unlimited NHS budget, help to eat out.... and a second lockdown to continue the madness, it seems the skys the limit on what they will spend. Why not help savers, its a fraction of the other expenditure. They seem to think its ok, we can just print.

Because they don't want people to save, they want them to spend!

Real interest rates are higher now than they've been over the last 10 years (ie less negative) as I said in my last post. The idea they're going to help savers is

eskbanker

MiserlyMartin said:

eskbanker said:

MiserlyMartin said:
the government ought to be doing much more to help hard pressed ordinary savers

At whose expense (and why)?

I already explained why. But seeing as expense is no object.... eg insanely generous furlough schemes, unlimited NHS budget, help to eat out.... and a second lockdown to continue the madness, it seems the skys the limit on what they will spend. Why not help savers, its a fraction of the other expenditure. They seem to think its ok, we can just print.

I didn't mean 'why should they help', I meant 'what's your justification for your choice of who should effectively pay for it', i.e. would you prefer borrowers to be penalised, or general taxation to be raised, or [?], and on what basis?  The magic money tree argument doesn't really cut it!

enthusiasticsaver

IanManc said:

enthusiasticsaver said:

Just moved £50k out of NS and I Income Bonds and opened a Yorkshire building society internet saver.  It  is immediate access so I can move again if needed. That pays 1% but is all accessible I will take the rest out  from NS and I tomorrow and close the account down.  The amount we need access to in the next couple of years will be kept there for emergencies, 2021 holidays and a  replacement car.  The rest is going in our investment portfolio which returned 6.3% this year so we will be reducing our cash holdings and using our allowance for the £2880 SIPPS payment for both of us and stocks and shares ISAS. 

Just in case you don't know, you won't be able to withdraw from your new account for 14 days after opening, whether or not you're a new customer.

I've just done exactly the same as you!  😊

Ah thanks for that.  I will leave the money to be invested elsewhere then because it may well be less than 14 days before I have to send that off. The rest of it wont be needed this year. 

onthebench

EdGasketTheSecond said:

Over 10K in PBs and no prizes at all since investing - 8 months; I must be subsidising some new millionaires.

Luck of the draw, literally. I've got just over £6k in PBs which has only been eligible for two draws (Aug and Sept) and won £25 both months.
I was going to increase my holding a bit before the end of this month, which is when I saw the announcement about the prize fund being cut. I'll probably still increase my holding to £10k though as PBs still seem to be reasonably competitive even with the new odds.

Copperbark

onthebench said:
PBs still seem to be reasonably competitive even with the new odds.

I think that's the stand-out line from the new rates - that Premium Bonds are still at a reasonable level, particularly given they're tax free.