From April, National Savings & Investments will seek to raise around £6 billion from savers, 40% down on the current £10.1 billion.
National Savings & Investments (NS&I) rates could fall again after it was announced in the Budget in March that it is looking to attract much less money from savers.
The government tells NS&I how much cash it can raise for its coffers through the sale of Premium Bonds and savings accounts. In its next financial year, which starts in April, it will look to raise around £6 billion from savers, 40% down on its current £10.1 billion.
Laura Suter, personal finance analyst at advisers AJ Bell, says: “This is a big hit on savers. The rates on offer from NS&I are likely to fall again.”
Even before the latest funding cut, NS&I had announced in February that its rates will tumble on no fewer than 14 accounts from 1 May. Its 21-million premium bond holders will see their chances of winning change from 24,500 to 1 to 26,000 to 1, as the prize draw fund drops from 1.4% to 1.3% of the amount held in the bonds.
The rate on income bonds, popular with pensioners as they pay interest each month, will suffer the most dramatic fall - from 1.15% to 0.7%. It means that someone with £50,000 will lose out on £225 a year.
The easy-access Direct Saver goes down from 1% to 0.7%. Those looking to renew bonds or fixed-rate certificates will be offered lower rates, down to as little as 1.1% for one year. These are not on general sale, but those who already have them have the chance to renew them when they come to the end of their term.
When announcing the cuts, chief executive Ian Ackerley said: “We need to ensure our interest rates are set at an appropriate position against those of our competitors.”