Savers under siege: Time is short for good returns. Sue Fieldman and Maria Scott report

THE savings market is in turmoil again following the interest-rate cut announced by Nationwide Building Society yesterday.

Other societies are likely to follow, and investors will have to act quickly to take advantage of the high-paying accounts still available. Nationwide is cutting its savings rates by an average of 0.4 per centage points, a move that will dismay its investors. It came less than 48 hours after the Government announced cuts of up to 0.8 percentage points in the rates paid on National Savings products.

Despite the National Savings cuts, many of its rates still look attractive because the accounts require low minimum investments and the rates are guaranteed. Financial advisers say that investors are also concerned about security at present, and like National Savings for this reason.

The cut was widely interpreted as a knee-jerk action by the Government to staunch the flow of money into National Savings and reduce the pressure on building society mortgage rates. Societies have argued that they could not afford to compete without putting up their mortgage rates.

Other societies are watching the Nationwide move closely and warning that if there is a wholesale readjustment of investment rates they are likely to move too.

Some societies, including Halifax, have already quietly trimmed their rates over recent weeks and may feel better able to maintain their present returns to investors.

Chelsea Building Society yesterday announced a 0.4 point cut in gross rates on its Chelsea Classic postal account, but said no others were being changed at present.

Nationwide's FlexAccount current account now pays from 2.5 per cent gross (1.88 per cent net) on amounts up to pounds 2,000, to 8.5 per cent gross (6.38 per cent net) on pounds 25,000 plus. The CashBuilder instant access savings account pays from 4.5 per cent gross (3.38 per cent net) to 8.8 per cent gross (6.6 per cent net) on pounds 25,000 upwards. The society's Tessa account pays from 10 per cent gross on pounds 25 to pounds 2,999 up to 10.4 per cent gross on pounds 8,400 to pounds 9,000.

These new rates apply from next Saturday.

Building societies have launched a number of new accounts and fixed-rate bonds since National Savings turned up the heat at the beginning of July with its new First Option Bond. Its rate was cut on 20 July and was not cut again this week. Several building society accounts now offer better rates than those available from the National Savings range, but these tend to become fully subscribed quickly, and there must be a question mark over how much longer societies will compete in this way.

Bristol & West has already cut the rates on its Balmoral Fixed Rate Bond, although they remain competitive. This postal account pays from 10 per cent gross (7.5 per cent net) on the minimum of pounds 5,000 up to 10.5 per cent gross (7.875 per cent) on pounds 50,000 plus. The rate is fixed until 31 July 1993.

Coventry Building Society launched its Fixed Rate Account at the end of July, paying 10.75 per cent gross (8.06 per cent net) on between pounds 1,000 and pounds 20,000, and 11 per cent gross (8.25 per cent net) on pounds 20,000-plus. There is a monthly income option which pays lower rates.

Cheltenham & Gloucester still has its London Fixed Rate Account paying 10.4 per cent gross (7.8 per cent net) on pounds 2,500 upwards until 1 October.

Building societies are still not guaranteeing to hold their mortgage rates. There are still a number of fixed-rate deals available, but rates on these are tending to creep up. C&G's new four-year rate is at 10.25 per cent.

Abbey National is slashing the rates on two old accounts, Seven Day and higher interest, to 1 per cent gross (0.75 per cent net), and writing to the 250,000 savers.

----------------------------------------------------------------------- CHANGES IN NATIONAL SAVINGS INTEREST RATES ----------------------------------------------------------------------- Old rate New rate Date Savings Certificates 8% 7.5% 24 August* (tax free) (37th issue) (38th issue) Yearly Plan 8% 7.5% 6 August (tax free) Capital Bonds 10.75% 10% 24 August (8.06% net) (7.5% net) (Series D) (Series E) Children's Bonus 10.9% 10.1% 24 August Bonds (tax-free) (Issue B) (Issue C) Income Bonds 9.25% 9% 18 September (6.94% net) (6.75% net) Investment Account 8.5% 8.25% 19 August (6.375% net) (6.19% net) Deposit Bonds** 9.25% 9% 18 September ----------------------------------------------------------------------- *Available now for reinvestment of matured certificates**No longer on sale Rates quoted gross unless specified otherwise -----------------------------------------------------------------------