NS&I to cut premium bond rate and other accounts

polymaff

Even today, about 0.9%, tax-free, easy access looks pretty good to some.  By the end of November - even more so?

norricorp

Several days after the interest rate drop of 1.16% to 0.01%, I am surprised at the lack of fuss. The aim for NS&I was to borrow £35bn this year and the Income Bond account presumably took a large chunk of that. And now a large proportion of that is going to be withdrawn by the end of the year. So as the Govt is spending money here, there and everywhere, £400m on interest in NS&I seems a drop in a bucket.

(I do kind of assume that the Govt has no rules on spending now - once you have overspent by £300bn, what is another £100bn - and is going to pay off debt and pay for stuff by printing money.)

adindas

I have been trying to understand how the premium bond work. I never had that before.

Is this 1% (Dec 2020) interest being the underlying interest and guaranteed you will get irrespectively whether you win the prize draw or not and on the top of that you could still have the chance to win the prize draw increasing the return??

I understand NS&I claim it as “The prize rate”, not “interest rate” so 1% is not a guaranteed interest based om my understanding.

The "prize rate" will be 1% (from Dec), but even with average luck you won't even earn that.

Unless you have a large of money to be put into saving, I wonder why the people keep comparing / refering it with instant saving/RSA ??  Where is the attraction of this NS&I premium bond over 1% RSA (say), what I have been missing here?

RG2015

@adindas,

You may find this helpful, in particular the link titled "What are Premium Bonds".

https://www.moneysavingexpert.com/savings/premium-bonds/

eskbanker

norricorp said:

Several days after the interest rate drop of 1.16% to 0.01%, I am surprised at the lack of fuss. The aim for NS&I was to borrow £35bn this year and the Income Bond account presumably took a large chunk of that. And now a large proportion of that is going to be withdrawn by the end of the year. So as the Govt is spending money here, there and everywhere, £400m on interest in NS&I seems a drop in a bucket.

(I do kind of assume that the Govt has no rules on spending now - once you have overspent by £300bn, what is another £100bn - and is going to pay off debt and pay for stuff by printing money.)

The interest rate hasn't dropped yet, it's scheduled for late November, but it was highlighted in earlier posts in this (lengthy!) thread that there are cheaper ways for the government to raise funds than paying out >1% to savers, so they won't be bothered about withdrawals....

refluxer

@adindas there is also a great summary of how premium bonds work and what you could expect by @bowlhead99 on page 22.

As a 'big' PB saver, my experience pretty much matches his observations. I've seen between 1 and 1.5% returns, with the average around 1.2% as you'd perhaps expect for someone with 'average luck'.  The tax-free element is a big incentive for those already maxing out their ISAs and the chance of a big win is simply a bonus.

norricorp

@eskbanker

I agree. The Govt can borrow at negative rates at the moment but it does seem very keen on being liked and u-turns at every opportunity so if the Telegraph or Labour kick up a fuss then perhaps it will drop the November drop.

The reality will be a mass withdrawl come November and then a flood of money looking for a new home so everyone else will drop their rates.

adindas

refluxer said:

@adindas there is also a great summary of how premium bonds work and what you could expect by @bowlhead99 on page 22.

As a 'big' PB saver, my experience pretty much matches his observations. I've seen between 1 and 1.5% returns, with the average around 1.2% as you'd perhaps expect for someone with 'average luck'.  The tax-free element is a big incentive for those already maxing out their ISAs and the chance of a big win is simply a bonus.

@Refluxer. I can not disagree with you if you are talking about exceeding tax limit on saving. But most people are not.

If you have a large some of money, in which part of it you will not use it for at least five years, then investing part of it in S&S ISA is probably a better option. But I agree this is subject to debate and personal circumstances and attitude to risk. Considering the current RPI rate you are actually losing money.

But come back to the original question I understand the 1% (from Dec) is the "prize rate" so if you are bnot lucky you will get much lower than 1%. Is that correct ??

Apodemus

adindas said:

refluxer said:

@adindas there is also a great summary of how premium bonds work and what you could expect by @bowlhead99 on page 22.

As a 'big' PB saver, my experience pretty much matches his observations. I've seen between 1 and 1.5% returns, with the average around 1.2% as you'd perhaps expect for someone with 'average luck'.  The tax-free element is a big incentive for those already maxing out their ISAs and the chance of a big win is simply a bonus.

But come back to the original question I understand the 1% (from Dec) is the "prize rate" so if you are bnot lucky you will get much lower than 1%. Is that correct ??

Yes.

If you are really unlucky you will get nothing.

If you have low sums in PBs, it could be a long time before even "average luck" grants you a single £25 prize.

chris112

Before I commit and stick the 50 K I've got from closing my IB and putting it in this 1.26% fixed one year account, does anyone know of a better rate for a one year fixed account? (That's backed by the FSCS)
 https://www.raisin.co.uk/1-year-frb/?gclid=Cj0KCQjwzbv7BRDIARIsAM-A6-2J4bFZAPt7grpHQIbB82_T6a7b6VhtFZtjXeeI9sEiT7UNQ48WQQoaAqb_EALw_wcB
Thanks