A broken bond: Odds of winning on Premium Bonds are slashed

0
43
Rates cuts: Treasury-backed savings giant National Savings and Investments is to cut rates on more than a dozen products including Britain
Amazon Advertisement
Amazon Advertisement


Millions of savers are in dire straits after National Savings and Investments (NS&I) announced sweeping rate cuts.

The Treasury-backed savings giant is to slash rates on more than a dozen products – including Britain’s most popular savings product Premium Bonds.

Experts say the Government needs to act urgently to reignite the nation’s savings habit, as many will be wondering where to shelter their nest eggs.

Rates cuts: Treasury-backed savings giant National Savings and Investments is to cut rates on more than a dozen products including Britain’s most popular savings product Premium Bonds

Money Mail has been calling for better rates to be paid to savers with our ‘Stop Short-Changing Savers’ campaign.

Former Conservative Party leader Iain Duncan Smith also writes in Money Mail today and calls for the Government to do more to bring relief to starved savers.

NS&I’s latest round of cuts, which start in May, will deprive savers of rewards worth a total of at least £234 million. 

The changes will hit nearly all of NS&I’s 25 million customers — including 21 million Premium Bond holders.

It comes as interest rates offered by High Street banks and building societies have been in freefall for months. 

NS&I says it has been forced to slash rates on savings accounts and bonds by as much as 0.45 percentage points in response to paltry rewards offered on the High Street, and the poor performance of Government bonds.

NS&I is also restricted as to how much money it can raise for Government, and it cannot offer rates that would undermine the commercial market. But the latest round of rates cuts are indicative of just how bad it has got for savers.

Experts fear banks and building societies will follow suit and cut their rates even further. Already, hot on the heels of NS&I cuts, Marcus by Goldman Sachs and Saga have announced rate drops.

The Marcus account goes down from 1.35 per cent to 1.30 per cent from today for new savers, and on March 10 for existing ones. 

The Saga Easy Access account, where the deposit taker is Goldman Sachs, also falls today to 1.3 per cent, including a 0.2 percentage point bonus.

So is there anywhere savers can safely put their money and still enjoy a decent return?

WHAT’S UP FOR THE CHOP?

NS&I will pull 173,718 tax-free prizes out of its monthly Premium Bonds prize draw. This includes one of the six £100,000 prizes and more than 145,000 of the £25 prizes.

Income bond-holders have been particularly badly hit. Some 180,000 savers will see their rate tumble by 39 per cent to 0.7 per cent from the current 1.15 per cent. 

These bonds offer easy access to your money and are popular with pensioners because they pay interest monthly.

The 0.7 per cent rate is at its lowest level since March 2009 when the general level of interest rates stood at 0.5 per cent, against 0.75 per cent today. Since then savers have earned as much as 2 per cent.

Anna Bowes, director at Savings Champion, says: ‘Pensioners will find this the cut particularly difficult. It will have a damaging effect on the money in their pocket.’

NS&I is also cutting the rate on its Direct Saver account from 1 per cent to 0.7 per cent; the Investment Account from 0.8 per cent to 0.6 per cent; Guaranteed Growth Bonds from 1.25 per cent to 1.1 per cent on a one-year fix when it matures; Guaranteed Income Bonds from 1.2 per cent to 1.05 per cent on a one-year fix; and a five-year Fixed Interest Savings Certificate from 1.9 per cent to 1.6 per cent.

WILL PREMIUM BONDS STILL PAY?

Around 21 million of us have money invested in Premium Bonds, and receive entry into a prize draw every month instead of guaranteed interest rate rewards.

NS&I is cutting the reward rate from an interest rate equivalent of 1.4 per cent to 1.3 per cent — the lowest it has been for more than two years.

As a result, the chances of receiving any rewards on your savings is dropping from one in 24,500 to one in 26,000.

There will still be two top prizes of £1 million, but the number of other prizes is being scaled back.

The number of £100 and £50 prizes on offer has halved — from 27,221 to just 13,448 of each.

For a saver with £50,000 invested, the chances of winning at least £25 a year are still 100 per cent. But for a saver with £1,000 invested, the odds will fall 4.4 per cent to 37 per cent.

Sarah Coles, personal finance analyst at investment platform Hargreaves Lansdown, says: ‘Even before the cuts, the most likely outcome for most Premium Bond savers was that they’d win nothing in a typical month.

‘Savers know they won’t get reliable returns, but they still love Premium Bonds because they offer the outside chance of a major tax-free prize. That’s not going to change: they’ll still be making two millionaires a month.’

But she adds: ‘The price you pay for opting for Premium Bonds is that you don’t earn any interest, so the chances are you’ll lose value after inflation.

‘They are unlikely to be the right place for all your savings and you should be sure you’re getting a competitive rate of return on the rest of your money.’

‘We will ditch our bonds if we stop winning’ 

Lizzy Dring was recommended Premium Bonds as a way of saving by her uncle a year ago, and has since bought thousands for herself and her young niece and nephew.

She has won four £25 cash prizes, but fears her lucky streak will slow after NS&I’s rate cuts.

Lizzy, who runs a team-building events firm, says: ‘NS&I should carefully look at how often they are reducing the chances of winning. I’d be happier to win smaller amounts but more often.

Disenchanted: NS &I investor Lizzy Dring, pictured with young niece Bella, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible

Disenchanted: NS &I investor Lizzy Dring, pictured with young niece Bella, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible

‘If they keep cutting the number of prizes, it will feel like the actual lottery, which most people have no chance of winning.’

As a self-employed worker, Lizzy, who lives in Norwich, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible.

You can cash in the bonds whenever you like, but it takes a few days for the money to reach your account.

The odds were also attractive.

She says: ‘I have only between £2,000 and £4,000 invested at any one time, and no other savings account could beat the bonds.’

However, Lizzy, 26, says her last win was in September, and the planned rate cuts will reduce her chances of winning.

She plans to give it another year, and if she wins only one cash prize — or, worse, none — she may move her money.

Rae Radford, 57, already plans to cash hers in. Only last month she invested £30,000 in Premium Bonds, but since hearing about the proposed cuts would rather put it towards property.

The retired social media expert, from Kent, chose bonds because they offered better odds compared with interest rates elsewhere.

Nikki Thomas has been a NS&I customer since 2014

Nikki Thomas has been a NS&I customer since 2014

She says: ‘What NS&I is planning to do is shocking. I will be looking to invest my cash somewhere else, that’s for sure.’

Meanwhile, career coach Nikki Thomas, from London, began taking her money out of NS&I in September, when it announced the last wave of cuts. She has split her cash between investments, high-interest savings accounts and Isas.

She says: ‘Premium Bonds are definitely not as good as they used to be, and I have noticed I do not win nearly as much. When I was winning prizes I used to recommend the bonds — but I wouldn’t any more.’

Nikki, 34, has been a NS&I customer since 2014. With interest rates generally so low, she and her friends chose the bonds because they seemed to be a better alternative.

Mother-of-one Claire Foster is also disappointed about NS&I’s rate cuts, but says she will stick with her Premium Bonds, still hoping to win the jackpot.

Her first bonds were bought for her as a baby by her grandparents, and she initially had a few thousand pounds worth. 

But after the sale of a flat six years ago Claire, who lives in Dulwich, South London, had the maximum holding of £50,000. The wins earned more than her cash Isa.

She chose NS&I Premium Bonds because she says they were ‘safe and easily accessible’.

Claire, 38, has also bought Premium Bonds for her one-year-old son, Arthur, and encourages family to do the same for his birthday and Christmas gifts. He has about £2,000 invested but has yet to win.

A combination of NS&I rate cuts and cashing in some bonds to fund her maternity leave has led to a drop in wins for Claire.

She says: ‘I’m disappointed the prizes will reduce again but remain hopeful for a big win. I check my number every month. ‘

Patricia Timpson, from Buckinghamshire, has had Premium Bonds for more than 30 years, and when her daughters married she bought them some, too.

But last night the 74-year-old said the cuts were ‘outrageous’.

She says: ‘I remember when my bank was offering 12 per cent interest. But now you no sooner put your money somewhere than the rate is cut. I thought low interest rates would be temporary, but they are just getting worse.’

IS PROTECTION WORTH PRICE?

Millions of savers choose to keep their money with NS&I because their cash is 100 per cent protected by the Government, whereas ordinary banks can only guarantee £85,000.

This total protection has seen savers flock to NS&I in the wake of the financial crisis and the collapse of Northern Rock. 

But experts say savers may now be considering whether the low rates are a price worth paying.

Justin Modray, of Candid Financial Advice, says: ‘As it continues to slash rates, NS&I is rapidly shifting from hero to zero.’

James Blower, founder of advice site Savings Guru, says: ‘NS&I is in a difficult position as the Government can raise money more cheaply through gilts.

‘But current rates are nowhere near the best buys. Cutting rates by up to 40 per cent feels savage in these circumstances.

‘With the exception of Premium Bonds, which are still competitive compared with easy-access savings accounts, I would suggest that NS&I savers look elsewhere.’

However, Patrick Connolly, from independent financial adviser Chase de Vere, believes NS&I is still an attractive prospect.

He says: ‘This is awful news for savers, but rates are terrible everywhere and are very unlikely to improve any time soon.’

WHERE SHOULD MY SAVINGS GO?

Savers have to work hard for a decent return. The UK’s biggest bank, Lloyds, has this month launched a one-year fixed-rate bond paying 1 per cent — but only to those who can afford the minimum deposit of £100,000.

The top-paying easy-access account on the market is currently Virgin Money’s Double Take E-Saver Issue 14, which pays interest at 1.31 per cent yearly. 

The Virgin Money Double Take E-Saver 14 can also pay interest at 1.3 per cent monthly.

Those happy to lock their savings up in fixed- rate bonds for a year can get 1.65 per cent annual interest with Atom bank. Meanwhile, Atom also pays monthly interest at 1.64 per cent for a one-year fixed deal.

Your money is covered by the UK Financial Services Compensation Scheme (FSCS) in all the banks and building societies in Money Mail’s best buy tables.

This gives you £85,000 of cover — £170,000 on joint accounts in the event of the provider running into trouble. The FSCS aims to pay out within seven days of any failure.

SO NOW IT’S OVER TO YOU, CHANCELLOR…

Pressure is mounting on the newly appointed Chancellor, Rishi Sunak, who is due to deliver the Conservative-majority Government’s first Budget next month.

Consumer experts are hoping something will be done to encourage the nation to save more.

Former pensions minister Steve Webb called on the Government to ‘think about how repeated interest-rate cuts undermine its wider message about the importance of saving’.

He says: ‘This latest announcement is another blow to those who are prudent and set something aside for a rainy day.’

Meanwhile, James Daley, of consumer campaign group Fairer Finance, says: ‘It’s been a rough decade for savers and the 2020s don’t look like they’re going to be much better.

‘With Rishi Sunak’s first Budget coming up, I’m sure savers will be keeping their fingers crossed that he’ll be doing something to support them.’

NS&I chief executive Ian Ackerley says: ‘Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors.

‘We believe our new rates offer our customers a fair return and the assurance of the 100 per cent HM Treasury guarantee on all their holdings with NS&I.’

b.wilkinson@dailymail.co.uk

 

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.



Source link

Amazon Advertisement
Amazon Advertisement


Millions of savers are in dire straits after National Savings and Investments (NS&I) announced sweeping rate cuts.

The Treasury-backed savings giant is to slash rates on more than a dozen products – including Britain’s most popular savings product Premium Bonds.

Experts say the Government needs to act urgently to reignite the nation’s savings habit, as many will be wondering where to shelter their nest eggs.

Rates cuts: Treasury-backed savings giant National Savings and Investments is to cut rates on more than a dozen products including Britain’s most popular savings product Premium Bonds

Money Mail has been calling for better rates to be paid to savers with our ‘Stop Short-Changing Savers’ campaign.

Former Conservative Party leader Iain Duncan Smith also writes in Money Mail today and calls for the Government to do more to bring relief to starved savers.

NS&I’s latest round of cuts, which start in May, will deprive savers of rewards worth a total of at least £234 million. 

The changes will hit nearly all of NS&I’s 25 million customers — including 21 million Premium Bond holders.

It comes as interest rates offered by High Street banks and building societies have been in freefall for months. 

NS&I says it has been forced to slash rates on savings accounts and bonds by as much as 0.45 percentage points in response to paltry rewards offered on the High Street, and the poor performance of Government bonds.

NS&I is also restricted as to how much money it can raise for Government, and it cannot offer rates that would undermine the commercial market. But the latest round of rates cuts are indicative of just how bad it has got for savers.

Experts fear banks and building societies will follow suit and cut their rates even further. Already, hot on the heels of NS&I cuts, Marcus by Goldman Sachs and Saga have announced rate drops.

The Marcus account goes down from 1.35 per cent to 1.30 per cent from today for new savers, and on March 10 for existing ones. 

The Saga Easy Access account, where the deposit taker is Goldman Sachs, also falls today to 1.3 per cent, including a 0.2 percentage point bonus.

So is there anywhere savers can safely put their money and still enjoy a decent return?

WHAT’S UP FOR THE CHOP?

NS&I will pull 173,718 tax-free prizes out of its monthly Premium Bonds prize draw. This includes one of the six £100,000 prizes and more than 145,000 of the £25 prizes.

Income bond-holders have been particularly badly hit. Some 180,000 savers will see their rate tumble by 39 per cent to 0.7 per cent from the current 1.15 per cent. 

These bonds offer easy access to your money and are popular with pensioners because they pay interest monthly.

The 0.7 per cent rate is at its lowest level since March 2009 when the general level of interest rates stood at 0.5 per cent, against 0.75 per cent today. Since then savers have earned as much as 2 per cent.

Anna Bowes, director at Savings Champion, says: ‘Pensioners will find this the cut particularly difficult. It will have a damaging effect on the money in their pocket.’

NS&I is also cutting the rate on its Direct Saver account from 1 per cent to 0.7 per cent; the Investment Account from 0.8 per cent to 0.6 per cent; Guaranteed Growth Bonds from 1.25 per cent to 1.1 per cent on a one-year fix when it matures; Guaranteed Income Bonds from 1.2 per cent to 1.05 per cent on a one-year fix; and a five-year Fixed Interest Savings Certificate from 1.9 per cent to 1.6 per cent.

WILL PREMIUM BONDS STILL PAY?

Around 21 million of us have money invested in Premium Bonds, and receive entry into a prize draw every month instead of guaranteed interest rate rewards.

NS&I is cutting the reward rate from an interest rate equivalent of 1.4 per cent to 1.3 per cent — the lowest it has been for more than two years.

As a result, the chances of receiving any rewards on your savings is dropping from one in 24,500 to one in 26,000.

There will still be two top prizes of £1 million, but the number of other prizes is being scaled back.

The number of £100 and £50 prizes on offer has halved — from 27,221 to just 13,448 of each.

For a saver with £50,000 invested, the chances of winning at least £25 a year are still 100 per cent. But for a saver with £1,000 invested, the odds will fall 4.4 per cent to 37 per cent.

Sarah Coles, personal finance analyst at investment platform Hargreaves Lansdown, says: ‘Even before the cuts, the most likely outcome for most Premium Bond savers was that they’d win nothing in a typical month.

‘Savers know they won’t get reliable returns, but they still love Premium Bonds because they offer the outside chance of a major tax-free prize. That’s not going to change: they’ll still be making two millionaires a month.’

But she adds: ‘The price you pay for opting for Premium Bonds is that you don’t earn any interest, so the chances are you’ll lose value after inflation.

‘They are unlikely to be the right place for all your savings and you should be sure you’re getting a competitive rate of return on the rest of your money.’

‘We will ditch our bonds if we stop winning’ 

Lizzy Dring was recommended Premium Bonds as a way of saving by her uncle a year ago, and has since bought thousands for herself and her young niece and nephew.

She has won four £25 cash prizes, but fears her lucky streak will slow after NS&I’s rate cuts.

Lizzy, who runs a team-building events firm, says: ‘NS&I should carefully look at how often they are reducing the chances of winning. I’d be happier to win smaller amounts but more often.

Disenchanted: NS &I investor Lizzy Dring, pictured with young niece Bella, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible

Disenchanted: NS &I investor Lizzy Dring, pictured with young niece Bella, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible

‘If they keep cutting the number of prizes, it will feel like the actual lottery, which most people have no chance of winning.’

As a self-employed worker, Lizzy, who lives in Norwich, was drawn to the bonds as a safe place to keep her cash which was not immediately accessible.

You can cash in the bonds whenever you like, but it takes a few days for the money to reach your account.

The odds were also attractive.

She says: ‘I have only between £2,000 and £4,000 invested at any one time, and no other savings account could beat the bonds.’

However, Lizzy, 26, says her last win was in September, and the planned rate cuts will reduce her chances of winning.

She plans to give it another year, and if she wins only one cash prize — or, worse, none — she may move her money.

Rae Radford, 57, already plans to cash hers in. Only last month she invested £30,000 in Premium Bonds, but since hearing about the proposed cuts would rather put it towards property.

The retired social media expert, from Kent, chose bonds because they offered better odds compared with interest rates elsewhere.

Nikki Thomas has been a NS&I customer since 2014

Nikki Thomas has been a NS&I customer since 2014

She says: ‘What NS&I is planning to do is shocking. I will be looking to invest my cash somewhere else, that’s for sure.’

Meanwhile, career coach Nikki Thomas, from London, began taking her money out of NS&I in September, when it announced the last wave of cuts. She has split her cash between investments, high-interest savings accounts and Isas.

She says: ‘Premium Bonds are definitely not as good as they used to be, and I have noticed I do not win nearly as much. When I was winning prizes I used to recommend the bonds — but I wouldn’t any more.’

Nikki, 34, has been a NS&I customer since 2014. With interest rates generally so low, she and her friends chose the bonds because they seemed to be a better alternative.

Mother-of-one Claire Foster is also disappointed about NS&I’s rate cuts, but says she will stick with her Premium Bonds, still hoping to win the jackpot.

Her first bonds were bought for her as a baby by her grandparents, and she initially had a few thousand pounds worth. 

But after the sale of a flat six years ago Claire, who lives in Dulwich, South London, had the maximum holding of £50,000. The wins earned more than her cash Isa.

She chose NS&I Premium Bonds because she says they were ‘safe and easily accessible’.

Claire, 38, has also bought Premium Bonds for her one-year-old son, Arthur, and encourages family to do the same for his birthday and Christmas gifts. He has about £2,000 invested but has yet to win.

A combination of NS&I rate cuts and cashing in some bonds to fund her maternity leave has led to a drop in wins for Claire.

She says: ‘I’m disappointed the prizes will reduce again but remain hopeful for a big win. I check my number every month. ‘

Patricia Timpson, from Buckinghamshire, has had Premium Bonds for more than 30 years, and when her daughters married she bought them some, too.

But last night the 74-year-old said the cuts were ‘outrageous’.

She says: ‘I remember when my bank was offering 12 per cent interest. But now you no sooner put your money somewhere than the rate is cut. I thought low interest rates would be temporary, but they are just getting worse.’

IS PROTECTION WORTH PRICE?

Millions of savers choose to keep their money with NS&I because their cash is 100 per cent protected by the Government, whereas ordinary banks can only guarantee £85,000.

This total protection has seen savers flock to NS&I in the wake of the financial crisis and the collapse of Northern Rock. 

But experts say savers may now be considering whether the low rates are a price worth paying.

Justin Modray, of Candid Financial Advice, says: ‘As it continues to slash rates, NS&I is rapidly shifting from hero to zero.’

James Blower, founder of advice site Savings Guru, says: ‘NS&I is in a difficult position as the Government can raise money more cheaply through gilts.

‘But current rates are nowhere near the best buys. Cutting rates by up to 40 per cent feels savage in these circumstances.

‘With the exception of Premium Bonds, which are still competitive compared with easy-access savings accounts, I would suggest that NS&I savers look elsewhere.’

However, Patrick Connolly, from independent financial adviser Chase de Vere, believes NS&I is still an attractive prospect.

He says: ‘This is awful news for savers, but rates are terrible everywhere and are very unlikely to improve any time soon.’

WHERE SHOULD MY SAVINGS GO?

Savers have to work hard for a decent return. The UK’s biggest bank, Lloyds, has this month launched a one-year fixed-rate bond paying 1 per cent — but only to those who can afford the minimum deposit of £100,000.

The top-paying easy-access account on the market is currently Virgin Money’s Double Take E-Saver Issue 14, which pays interest at 1.31 per cent yearly. 

The Virgin Money Double Take E-Saver 14 can also pay interest at 1.3 per cent monthly.

Those happy to lock their savings up in fixed- rate bonds for a year can get 1.65 per cent annual interest with Atom bank. Meanwhile, Atom also pays monthly interest at 1.64 per cent for a one-year fixed deal.

Your money is covered by the UK Financial Services Compensation Scheme (FSCS) in all the banks and building societies in Money Mail’s best buy tables.

This gives you £85,000 of cover — £170,000 on joint accounts in the event of the provider running into trouble. The FSCS aims to pay out within seven days of any failure.

SO NOW IT’S OVER TO YOU, CHANCELLOR…

Pressure is mounting on the newly appointed Chancellor, Rishi Sunak, who is due to deliver the Conservative-majority Government’s first Budget next month.

Consumer experts are hoping something will be done to encourage the nation to save more.

Former pensions minister Steve Webb called on the Government to ‘think about how repeated interest-rate cuts undermine its wider message about the importance of saving’.

He says: ‘This latest announcement is another blow to those who are prudent and set something aside for a rainy day.’

Meanwhile, James Daley, of consumer campaign group Fairer Finance, says: ‘It’s been a rough decade for savers and the 2020s don’t look like they’re going to be much better.

‘With Rishi Sunak’s first Budget coming up, I’m sure savers will be keeping their fingers crossed that he’ll be doing something to support them.’

NS&I chief executive Ian Ackerley says: ‘Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors.

‘We believe our new rates offer our customers a fair return and the assurance of the 100 per cent HM Treasury guarantee on all their holdings with NS&I.’

b.wilkinson@dailymail.co.uk

 

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.



Source link

Amazon Advertisement

LEAVE A REPLY

Please enter your comment!
Please enter your name here