Coronavirus - we're here to help
From how to access your account online, scam awareness, your wellbeing and our community we're here to help.

Skip to main content
  • Register
  • Help
  • Contact us
  • Log in to HL Account

NS&I cut interest rates – what it means for your savings

What the latest cut could mean for your savings and how Active Savings could get your cash working harder.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

National Savings and Investments (NS&I) has announced it’ll reduce interest rates on their savings products. These will come into effect from 1 May. The cuts are applied across a few different products, with the return on its Income Bond being reduced by 39%.

Product Current rate (AER/Gross*) New rate from May
Direct Saver 1.00% 0.70%
Investment Account 0.80% 0.60%
Income Bonds 1.15% 0.70%

Source: NS&I

In addition to the cuts, the odds of winning a Premium Bond prize will decrease from a 1 in 24,500 chance to 1 in 26,000. There will still be the same number of £1,000,000 prize winners, but every other prize value will see a drop in the number of winners. That means there's likely to be over 173,000 less prizes:

Value of prizes Number of prizes in Feb Number of prizes from May (estimated)
£1,000,000 2 2
£100,000 6 5
£50,000 12 11
£25,000 23 21
£10,000 59 54
£5,000 119 106
£1,000 1,984 1,857
£500 5,952 5,571
£100 27,221 13,448
£50 27,221 13,448
£25 3,408,513 3,262,871
Total 3,471,112 3,297,394

Source: NS&I

If you hold a Guaranteed Growth Bond, Guaranteed Income Bond or a Fixed Interest Savings Certificate and your investments mature on or before 1 June 2020, you can still get the previous higher interest rate as long as you automatically renew in to a new issue of the same term.

Why it’s cut interest rates

NS&I has pointed the finger at exceptionally low gilt yields, which are used for tracking the cost effectiveness of the finance it raises for the Government. It’s said that the cuts will re-balance the interests of savers and taxpayers, whilst also helping to maintain the stability of the broader financial services sector.

It’s the second cut that NS&I savers have endured in the space of five months, with rates for both new customers, and some rolling over, taking effect in September.

NS&I products have long been popular with the public because of the government guarantee on their money, and the fact that the interest earnt is tax free on some accounts.

But if you’re prepared to look somewhere else, you could get much better rates on your savings while still benefitting from some protection on your money through the Financial Services Compensation Scheme (FSCS). Eligible deposits are protected up to £85,000 per banking licence with the FSCS.

More on the FSCS

And the best thing is you don’t have to spend hours scouring the market and going through the hassle of applying to different banks, providing the same information and verifying your identity each time. There’s a new way that gives you great rates while cutting out the hassle.

An alternative home for your savings

Active Savings lets you choose savings products from a range of different banks and building societies offering great rates, all through the convenience of one online account. There’s easy access and fixed term savings up to three years to choose from, with rates up to 1.20% (AER/Gross*) on an easy access account. On a savings pot of £35,000, that’s £175 more interest after one year than the new Direct Saver rate through NS&I.

So why not improve the way you save, for the better? You can try Active Savings from as little as £1.

Discover Active Savings

This article isn't personal advice, but could help you make your own decisions so you can make more of your money. If you are unsure of the suitability of a product for your circumstances, please seek advice. Inflation reduces the future spending power of money. Fixed term products generally only allow access to funds at maturity. Rates available through Active Savings can be withdrawn at any time.

Please note that interest from Active Savings products is paid gross and counts towards your Personal Savings Allowance. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue and Customs.

*AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rates on different savings products.

Gross means the interest rate without any tax deducted. Interest is paid gross. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs.

Expected profit rise – Islamic banks offer an expected profit rate, rather than interest on their savings products, in order to comply with Sharia banking principles.

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248. The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 with firm reference 751996 for the provision of payment services. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Investing and saving

Inheritance tax – is your area paying the most?

With over £5.1bn being paid in inheritance tax last year, we look at which areas had the highest IHT bills and give some practical tips to help reduce any future IHT bills.

Laura Burridge

10 Aug 2020 5 min read

Category: Investing and saving

Pension freedoms 5 years on – what the coronavirus crisis teaches us

Five years on since the introduction of pension freedoms, we look at how the coronavirus crisis has influenced pension withdrawals, and why it might prove the freedom naysayers wrong.

Nadeem Umar

10 Aug 2020 5 min read

Category: Investing and saving

What to do with your lockdown savings?

With some people financially better off in lockdown, Hannah Duncan looks at why now could be the time to use that money wisely.

Hannah Duncan

04 Aug 2020 6 min read

Category: Investing and saving

£5.1bn paid in inheritance tax last year – 5 steps to cut your bill

We look at the latest figures on inheritance tax and give five steps to help cut your inheritance tax bill.

Laura Burridge

03 Aug 2020 5 min read