Savers suffer pre-emptive strike on rates

ING Direct has announced that the gross rate on its online and telephone savings account will fall from 4.89 to 4.65 per cent from 1 August. An anticipated fall in the base rate, currently 4.75 per cent, is the reason for its decision, a spokeswoman says.

National Savings & Investments (NS&I), the government-backed provider, has also swung the axe. Its interest cuts took effect last Thursday across a range of fixed-rate savings accounts. These include the Children's Bonus Bond (19th issue), which fell by 0.45 percentage points to 3.65 per cent.

NS&I's five-year, fixed-interest savings certificate (80th issue) also slipped - by 0.2 percentage points to 2.85 per cent.

It has blamed the cuts on "significant falls in gilt yields" - the returns it gets from government bonds. When these decline, it explains, so do the rates it in turn offers to customers.

"Further falls [in gilt yields] have demanded we make these changes," says Peter Cornish, an NS&I spokesman.

Its variable-rate products, such as premium bonds and the easy-access savings account, remain unchanged, he adds.

Although the Bank of England base rate has stayed steady for 11 months, providers have cut rates to protect their margins.

In the past few months, banks including HSBC, Alliance & Leicester and Sainsbury's Bank have all slashed deals on variable-rate savings accounts.

Despite ING Direct's decision, its savings account is still a sound proposition for a "no-notice, no-strings" account, says Terry Cutworth from financial analyst Moneyfacts. Intelligent Finance's 4.75 per cent on its Direct Access account is also worth considering, she adds.

For online savers, Ms Cutworth picks out Northern Rock's Tracker Online paying 5.41 per cent, and the AA's Internet Savings account paying 5.11 per cent.

The AA is also offering a decent phone-based account - the Telephone Savings (Issue 3), offering 5.06 per cent - and Chelsea building society is paying 5.25 per cent on its Rainy Day savings account.

With the exception of ING Direct and Intelligent Finance, all the above variable saving accounts include an introductory bonus that will later drop away.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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