National Savings & Investments, the Government-backed savings bank, has taken two of its most attractive products off the market several weeks early after unprecedented demand.
Its three- and five-year savings bonds, launched at the end of October, offered interest rates of up to 4.6 per cent a year – more than even the best equivalent products in the private savings sector.
Yesterday, however, NS&I said the deals were being withdrawn less than two months after their launch because it had now hit its sales targets. The accounts were originally scheduled to stay on offer until the new year.
"Due to the popularity of the three-year and five-year issues, our sales targets for these bonds were achieved more quickly than originally expected," a spokesman for NS&I said. He added that the institution had "to ensure that NS&I continues to balance the interests of savers, the taxpayer and the stability of the wider financial services marketplace".
Darren Cook, of personal finance analyst Moneyfacts, said that in the current low interest rate environment – the Bank of England's monetary policy committee this week left base rates at an historic low of 0.5 per cent – savers were competing for the best products. "It is not unusual that savings bonds are prematurely withdrawn due to them being oversubscribed," he added.
However, rival savings account providers have complained that NS&I has an artificial advantage because customers are reassured by its Government-backed status. By contrast, privately-owned banks and building societies have suffered since last year's financial crisis amid savers' nervousness about the security of their deposits.
Those tensions have seen NS&I forced to take account of rival offerings when pricing its savings products, particularly given its role as one arm of the Government's fund-raising operation at a time of heavy borrowing.
Similar strictures apply to Northern Rock, the bank that remains under national ownership following its collapse. It has had to guarantee that it will not win more than a set share of the savings and lending market, given that it now has the same state guarantees underwriting it as NS&I.Reuse content