NS&I to cut premium bond rate and other accounts

Sailtheworld

d63 said:

effective taxpayer subsidy? huh? surely any money that is paid out in interest is like the premium bond prizes just being paid for from the money people have on deposit with them? 

That's not how it works. NS&I savers are lending their money to the government in return for a fee which is paid for by the taxpayer. The government chose to pay these market leading interest rates when far cheaper borrowing was available - that's a taxpayer subsidy.

Classic trickle up. 

zagfles

Sailtheworld said:

d63 said:

effective taxpayer subsidy? huh? surely any money that is paid out in interest is like the premium bond prizes just being paid for from the money people have on deposit with them? 

That's not how it works. NS&I savers are lending their money to the government in return for a fee which is paid for by the taxpayer. The government chose to pay these market leading interest rates when far cheaper borrowing was available - that's a taxpayer subsidy.

Classic trickle up. 

Who says it's a taxpayer subsidy? With the recent massive cuts in NS&I rates it looks more like the very temporary market leading rates were a loss leader, in the same way that some banks pay around 5% interest on current accounts, regular savers etc. Get the money in and then cut the rates and benefit from apathy.

The new rates on most NS&I accounts are less than the yield on gilts, so it's investors who are subsidising the taxpayer now!

Sailtheworld

zagfles said:

Sailtheworld said:

d63 said:

effective taxpayer subsidy? huh? surely any money that is paid out in interest is like the premium bond prizes just being paid for from the money people have on deposit with them? 

That's not how it works. NS&I savers are lending their money to the government in return for a fee which is paid for by the taxpayer. The government chose to pay these market leading interest rates when far cheaper borrowing was available - that's a taxpayer subsidy.

Classic trickle up. 

Who says it's a taxpayer subsidy? With the recent massive cuts in NS&I rates it looks more like the very temporary market leading rates were a loss leader, in the same way that some banks pay around 5% interest on current accounts, regular savers etc. Get the money in and then cut the rates and benefit from apathy.

The new rates on most NS&I accounts are less than the yield on gilts, so it's investors who are subsidising the taxpayer now!

If the government viewed this as a taxpayer funded teaser rate to secure future cheaper borrowing based on general fatigue at chasing rates I'd be well impressed. Cunning plan or just overpaying for debt for longer than was required? Tough choice.

zagfles

Sailtheworld said:

zagfles said:

Sailtheworld said:

d63 said:

effective taxpayer subsidy? huh? surely any money that is paid out in interest is like the premium bond prizes just being paid for from the money people have on deposit with them? 

That's not how it works. NS&I savers are lending their money to the government in return for a fee which is paid for by the taxpayer. The government chose to pay these market leading interest rates when far cheaper borrowing was available - that's a taxpayer subsidy.

Classic trickle up. 

Who says it's a taxpayer subsidy? With the recent massive cuts in NS&I rates it looks more like the very temporary market leading rates were a loss leader, in the same way that some banks pay around 5% interest on current accounts, regular savers etc. Get the money in and then cut the rates and benefit from apathy.

The new rates on most NS&I accounts are less than the yield on gilts, so it's investors who are subsidising the taxpayer now!

If the government viewed this as a taxpayer funded teaser rate to secure future cheaper borrowing based on general fatigue at chasing rates I'd be well impressed. Cunning plan or just overpaying for debt for longer than was required? Tough choice.

Well virtually every other financial institution does it, regular savers, 0% credit card balance transfers, bank accounts that pay temporarily high interest, or have switching incentives, insurance quotes at the top of comparison sites but renewals uncompetitive etc etc. Why shouldn't NS&I do the same? They were only market leading for a few months and some people seem to think it's some of conspiracy to deliberately subsidise the "rich" at the expense of the taxpayer!

Sailtheworld

NS&I has been the home for apathetic cash for decades. They didn't need teaser rates and there's no evidence that this £1bn was part of a teaser rate strategy i.e. it's a conspiracy theory.

zagfles

Sailtheworld said:

NS&I has been the home for apathetic cash for decades. They didn't need teaser rates and there's no evidence that this £1bn was part of a teaser rate strategy i.e. it's a conspiracy theory.

Is there evidence it was anything else? I'm just speculating they might be acting like all other banks act. Without any proof to the contrary, I find that far more credible than it being some sort of sinister ploy to enrich those who have substantial savings by giving them slightly more than the marking leading rates of commercial banks for a few months.

coachman12

There are people like me who are neither apathetic nor wanting to lose their wealth and they, like me, have had a great deal of money locked in NS&I for decades because the normal FCSC protection limits are of no use at all. I will be continuing to use NS&I as usual----and I still have fixed interest bonds that are as high as 2.5 %. 

Eco_Miser

NS&I cancelled an announced drop in rates at the start of the pandemic. 

I think this was an attempt by the Treasury to stop rates dropping through the floor everywhere at a time of panic.

Other rates from banks dropped anyway, so now NS&I have dropped theirs, to return to their normal market trailing (but totally secure) position.

No conspiracy, no teasers, just an attempt to maintain stability.

eskbanker

coachman12 said:

There are people like me....

Don't bet your house on it!

coachman12 said:

....who are neither apathetic nor wanting to lose their wealth and they, like me, have had a great deal of money locked in NS&I for decades because the normal FCSC protection limits are of no use at all. I will be continuing to use NS&I as usual----and I still have fixed interest bonds that are as high as 2.5 %. 

Have you stayed ahead of inflation by keeping very large sums on long-term deposit in NS&I though?  Obviously some of their products have degrees of protection against taxation and/or loss of real-terms value, but not all....

coachman12

eskbanker said:

coachman12 said:

There are people like me....

Don't bet your house on it!

Have you stayed ahead of inflation by keeping very large sums on long-term deposit in NS&I though?  Obviously some of their products have degrees of protection against taxation and/or loss of real-terms value, but not all....

What do you mean by "don't bet your house on it ", please ? ( and BTW it's "houses" as I know you are the most pedantic/punctilious poster on MSE ). As to your question, the answer which should be obvious to anyone is "no"  (although some of the fixed rates still in force help somewhat). My cushion against inflation is always more than covered in my large stocks and share portfolios and deposit box collectibles that attract far more than inflation rates at any time, and they more than compensate for savings rates in NS&I.
Thank you for your interest in my personal welfare.