NS&I MAKES CHANGES TO ITS FIXED-TERM PRODUCT RANGE AND ISSUES PROVISIONAL Q1 2019-20 RESULTS

• NS&I’s 1-year and 3-year Issues of Guaranteed Growth Bonds and Guaranteed Income Bonds are no longer on general sale
• Interest rates on new Issues of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates for customers with maturing investments will be reduced by 25 basis points across all terms
• NS&I delivers £2 billion of Net Financing and returned a Value Indicator figure of -£119 million in Q1 2019-20

NS&I is today (2 September 2019) announcing changes to its fixed-term product range. With immediate effect, 1-year and 3-year Issues of Guaranteed Growth Bonds and Guaranteed Income Bonds are no longer on general sale, while NS&I has also reduced the interest rate on all terms of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates for customers with maturing investments by 25 basis points.

The changes to NS&I's fixed term products are as a consequence of a number of factors. Rates for similar competitor products have been falling while the measure that NS&I uses for raising cost-effective finance for the Government is lower than target, due to exceptionally low gilt yields. These changes have been made in order to rebalance the interests of savers and taxpayers, and to help maintain the stability of the broader financial services sector.

Current holdings will be unchanged until they mature. NS&I will contact all holders of Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates at least 30 days before their investments reach the end of their term to explain their options.

Customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates and whose products mature on or before 5 October 2019 and who automatically renew into a new Issue of the same term, will receive the previous, higher interest rate.

However, any customers who choose to renew into a new Issue but a term of a different length will receive the reduced rate effective from 2 September 2019.

Provisional Q1 2019-20 results

NS&I, also today, published its latest unaudited quarterly figures, for the first quarter of the financial year 2019-20 (April-June 2019).

In Q1 2019-20, NS&I delivered £2.0 billion of Net Financing. NS&I returned a negative Value Indicator in Q1 2019-20 of -£119 million. Value Indicator is the measure that NS&I uses for raising cost-effective finance for the Government and is currently lower than target, due to exceptionally low gilt yields.

The March 2019 Spring Statement confirmed that NS&I’s 2019-20 Net Financing target is to deliver £11 billion, within a range of £8 billion to £14 billion.

NS&I’s Value Indicator target for 2019-20 is to deliver £20 million of value, but with a lower limit of £0 (zero). The lower limit is important because it allows NS&I to continue to balance the interests of its savers, taxpayers and the stability of the broader financial services sector through a period of low gilt yields.

Jill Waters, NS&I Retail Director, said:

“It is important that NS&I continues to balance the needs of our savers with taxpayers and the stability of the broader financial services sector.

Guaranteed Growth Bonds and Guaranteed Income Bonds have been available to new customers for over 20 months at competitive interest rates. For those customers with existing investments, the new rates still present a fair deal alongside the benefit of our unique 100% HM Treasury guarantee.”

Unaudited Q1 2019-20 results (1 April – 30 June 2019)

All figures are in £ billion and are subject to rounding. Q1 2019-20 figures are provisional, unaudited and subject to change due to transaction processing (evidence of identity) adjustments, cancellation and any accounting adjustments.

*C&AIP is capitalised and accrued interest and prizes earned. All figures are in £ billion and subject to rounding.

**Excluding 65+ Bonds and Investment Guaranteed Growth Bonds.

NS&I reports quarterly on gross inflows and outflows, Net Financing and total stock.  Each quarter, NS&I issues these unaudited figures and publishes its Annual Report and audited accounts each financial year.

Notes to Editors

1. NS&I is one of the largest savings organisations in the UK, offering a range of savings and investments to 25 million customers. All products offer 100% capital security, because NS&I is backed by HM Treasury.

2. Net Financing – the measure of the net change of NS&I funds, meaning total inflows from deposits, retention of maturing monies and capitalised and accrued interest, less the total outflows from withdrawals and interest or Premium Bonds prize draw payments. A positive Net Financing figure represents a positive contribution to government financing.

3. AER stands for Annual Equivalent Rate and enables the comparison of interest rates from different financial institutions and across different products on a like-for-like basis. It shows what the notional annual rate would be if interest was compounded each time it was credited or paid out. Where interest is credited once a year the rate quoted and the AER will be the same.

4. Gross is the taxable rate of interest without the deduction of UK Income Tax.

5. Value Indicator – an indication of NS&I’s cost-effectiveness in raising finance for the Government. In general, it compares the total cost of delivering Net Financing and servicing existing customers’ deposits with how much it would cost the Government to raise funds through the wholesale market via equivalent gilts. Some adjustments and assumptions are made to the calculation, including in identifying and applying an equivalent gilt, in response to specific NS&I product features. Index-linked Savings Certificates are included in the calculation of the Value Indicator and use the same approach as for other products, with one exception to the formula. As the real yield gilt comparators for RPI linked products are currently negative, NS&I applies a floor to the comparative yield set at zero, which means the calculation does not fully reflect the Value Indicator profile of this product. The Value Indicator methodology is agreed with HM Treasury and is reviewed and revised periodically, with its agreement, to support a long-term approach to product strategy.

6. For further information, please contact the NS&I media team.