NS&I savers ‘may need to be braced for less generous rates’

The savings giant has already reached its funding target for the tax year.

Savers may need to brace themselves for less generous rates on NS&I accounts, an expert has suggested, as the Government-backed provider has already reached its fundraising target for the tax year.

Figures released by NS&I, which also provides Premium Bonds, showed it delivered £7.7 billion of net financing in the second quarter of 2023/24, bringing its half-year total to £9.8 billion.

Its net financing target for 2023/24, set at the spring budget 2023, is £7.5 billion, with room for manoeuvre of plus or minus £3 billion.

Laura Suter, head of personal finance at AJ Bell, said: “Savers should brace themselves for rate cuts on NS&I accounts and for the Premium Bond prize fund to fall – as the Government-backed provider has already exceeded its fundraising target for the tax year.

The latest figures from the provider show it attracted £9.8 billion of savers' money at the half-year point, with £7.7 billion of that coming in the second quarter alone

Laura Suter, AJ Bell

“The success of NS&I’s one-year guaranteed bonds this summer saw huge numbers of savers put their money in the accounts and means that the provider leapt past its £7.5 billion annual fundraising target in just six months.

“The latest figures from the provider show it attracted £9.8 billion of savers’ money at the half-year point, with £7.7 billion of that coming in the second quarter alone, predominantly from the one-year bonds.

“The small print of the autumn statement yesterday confirmed that the Government hasn’t changed the target for how much it wants NS&I to raise in the current tax year – sticking firm at £7.5 billion.

“It gives the provider generous wiggle-room of £3 billion either side of that target, meaning it can only raise another £700 million in the next six months before it breaches its extended target.”

NS&I, which has 24 million customers, has a duty to balance the interests of savers, taxpayers and the broader financial services sector.

Money held with the savings giant has 100% security, as it is backed by the Treasury.

Ms Suter added: “The Government-backed provider raises rates to draw more savers in – if it doesn’t need to attract any more money it will cut those rates.

“It has to play a delicate balancing act to avoid mass withdrawals that counteract the inflows it’s already seen this year – so a slow and steady approach to cuts is more likely than a giant axe to rates.

“We’ve already seen NS&I pull its guaranteed bonds and cut the rate on its Green Savings Bond, but it’s highly likely that other accounts will be up for the chop too.

“Over the past two years NS&I has hiked the effective prize fund on Premium Bonds – taking it to a 23-year high in August – and often making it the market-leading account. But as other providers take the axe to savings rates, NS&I will follow suit.

“This is another sign for savers to shop around and nab the best rates before they fall further.”

We currently expect to end the year within the net financing target range of £4.5 billion to £10.5 billion

NS&I spokesperson

An NS&I spokesperson said: “In a dynamic savings market, we have supported savers with successive interest rate increases across many of our variable and fixed-term products.

“Inflows and outflows vary throughout the year depending on customer priorities and the products on offer, so net financing can differ from quarter to quarter. 

“We currently expect to end the year within the net financing target range of £4.5 billion to £10.5 billion.

“We review the interest rates on all of our products regularly to ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”