National Savings and Investments (NS&I) is decreasing the interest rates on its variable savings offers by up to 0.25% per annum.
This decrease follows the movement in the Bank of England base rate on 7 February 2008, from 5.50% to 5.25%, which has a bearing on NS&I’s variable rate products. The revised interest rates will come into effect on 22 February 2008 for all variable rate products, except for the Direct ISA which was decreased on 7 February 2008, Premium Bonds which will take effect from 1 March 2008 and Income Bonds from 6 March 2008.
Premium Bonds
The Premium Bond prize fund rate will decrease from 3.80% to 3.60% p.a. free of UK Income Tax and Capital Gains Tax. NS&I will continue to give away over one million tax-free Premium Bond prizes each month, including two £1 million jackpot prizes.
The odds of winning a prize with each £1 Premium Bond will remain at 21,000 to 1.
The effect of changes in the Premium Bond prize fund rate
| |
February 2008 |
March 2008 (estimated) |
| Total value of prizes |
£114,253,708 |
£107,569,950 |
| Total number of prizes |
1,718,100 |
1,707,459 |
| Prize fund rate |
3.80% |
3.60% |
| Odds of winning a prize |
21,000-to-1 |
21,000-to-1 |
Guaranteed Income Bonds and Guaranteed Growth Bonds
In addition, NS&I will launch two new fixed rate Bonds on 23 February 2008, the Guaranteed Income Bond and the Guaranteed Growth Bond.
The Guaranteed Income Bond offers customers the opportunity to receive their interest as a monthly income whilst with the Guaranteed Growth Bond customers will receive their interest at the end of their chosen investment term. Both the new Bonds will offer customers the opportunity to invest between £500 and £1 million in a fixed rate bond, with guaranteed rates of interest of between 3.85-4.05%, for either one, three or five year terms.
Guaranteed Growth Bonds rates
| Length of investment |
Rate p.a. |
AER2 |
| 1-year Issue 1 |
3.95% |
3.95% |
| 3-year Issue 1 |
4.00% |
4.00% |
| 5-year Issue 1 |
4.05% |
4.05% |
Guaranteed Income Bonds rates
| Length of investment |
Rate p.a. |
AER2 |
| 1-year Issue 1 |
3.85% |
3.92% |
| 3-year Issue 1 |
3.90% |
3.97% |
| 5-year Issue 1 |
3.95% |
4.02% |
Notes to editors
Tax-free variable rate products
| Product |
Rate p.a. (change in brackets) |
AER2 |
| Cash mini-ISA |
4.85% (-0.25%) |
4.85% |
| Direct ISA |
5.80% (-0.25%) |
5.80% |
| Premium Bonds prize fund |
3.60% (-0.20%) |
3.60% |
Taxable variable rate products
| Income Bonds |
Rate p.a. |
AER2 |
| £25,000+ |
4.95% (-0.25%) |
5.06% |
| Under £25,000 |
4.70% (-0.25%) |
4.80% |
| Investment Account |
Rate p.a. |
AER2 |
| £50,000+ |
4.35% (-0.25%) |
4.35% |
| £25,000+ |
4.00% (-0.25%) |
4.00% |
| £10,000+ |
3.80% (-0.25%) |
3.80% |
| £5,000+ |
3.60% (-0.25%) |
3.60% |
| £500+ |
3.50% (-0.25%) |
3.50% |
| Under £500 |
3.45% (-0.25%) |
3.45% |
| Easy Access Savings Account |
Rate p.a. |
AER2 |
| £50,000+ |
4.65% (-0.25%) |
4.65% |
| £25,000+ |
4.40% (-0.25%) |
4.40% |
| £10,000+ |
4.15% (-0.25%) |
4.15% |
| £5,000+ |
3.90% (-0.25%) |
3.60% |
| £1,000+ |
3.60% (-0.25%) |
3.60% |
| Under £1,000 |
2.10% (-0.25%) |
2.10% |
- Tax-free means that interest and prizes are exempt of UK income Tax and Capital Gains Tax
- Gross means the taxable rate of interest without the deduction of UK Income Tax
- AER stands for Annual Equivalent Rate and enables the comparison of interest rates from different financial institutions and across different products on a likefor-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
- When interest rates are set on tax-free products, NS&I takes into account the amount of tax the Exchequer would have received if the product had been taxable.
