I’d think about ditching your NS&I savings accounts at the end of this week.
On Friday, the rate on the National Savings & Investment popular easy-access account, Direct Saver, falls to 3.5 per cent. It’s a big drop meted out by the Government’s savings arm – down from 3.75 per cent and 4 per cent earlier this year.
Down too, goes the rate on its Income Bond, from 3.69 pc to 3.44 pc. This account has proven particularly popular with pensioners who value an income from their savings as it pays out interest each month.
The shocking cuts come close on the heels of NS&I’s cuts to its fixed rate bonds.
Here, it offers just 3.95 per cent to savers looking to renew their one-year bonds coming up for maturity. It’s a huge blow for savers, down from 4.35 per cent on offer from mid-October until the start of this month. In July the rate on offer was a tempting 5.15 per cent. On two-year bonds you can now get a lowly 3.6 per cent and 3.5 per cent for three years.
This flurry of cuts means you can get a better deal elsewhere. So where should you move your cash?
While I’d ditch most of NS&I’s accounts, I’m holding on to my Premium Bonds, even though the prize rate is falling for the January draw
You can get a rate substantially better than NS&I’s Direct Saver from online bank Chetwood. It offers at 4.71 per cent, which gives you £121 more interest a year on £10,000.
Atom Bank Instant Saver Reward is another good option – but only if you plan to withdraw money from your account from time to time.
The account pays an impressive 4.85 per cent in months you don’t make any withdrawals and 3.25 per cent in those that you do.
These two accounts are also a good swap for NS&I’s Income Bond for those who prefer to receive interest monthly.
They pay 4.61 per cent and 4.75 per cent respectively, if interest is received monthly, against NS&I’s 3.44 per cent.
If you would prefer an account available on the High Street, look to your local building society. For example, Kent Reliance pays 4.35 per cent; Cambridge BS, 4.25 per cent; and Family BS, 4.65 per cent. Or Co-op Bank will pay you 4.59 per cent, as long as you only make one withdrawal a year.
You could earn around £85 more interest on each £10,000 that you move from an NS&I fixed-rate bond to a more-competitive rival. For example, you can grab 4.8 per cent fixed for one year with Ziraat Bank through Raisin UK savings platform*, or 4.77 pc from new bank Vida Savings.
High Street rates are lower but it’s still worth the switch with the likes of Kent Reliance at 4.65 per cent and Mansfield BS at 4.4 per cent.
Savers with large sums sometimes prefer to stick with NS&I even when rates are lower.
This is because all your cash is protected by the Government – with a bank or building society only the first £85,000 is protected under the Financial Services Compensation Scheme.
Some savers prefer to keep a large balance with NS&I rather than taking the risk with another provider or enduring the hassle of opening several accounts to spread it out.
However, for these savers there is another good option. Online savings platforms such as Hargreaves Lansdown, Flagstone, Raisin UK and Savings Champion, allow you to keep all your money on one platform and split it between several providers, each of which give you the £85,000 protection. Using a platform means you only have to enter all of your personal information once.
While I’d ditch most of NS&I’s accounts, I’m holding on to my Premium Bonds, even though the prize rate is falling for the January draw. They come with the thrill of the monthly draw where you could win a big tax-free prize.
They are also handy as a home for some easy-access money, including the amount I hand over every six months to the tax man, as you can get your money back within a few days. My winnings this year racked up a decent 4.9 per cent tax free. Only time will tell if holding on to them is the right financial decision.
*Products featured in this article are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence
SAVE MONEY, MAKE MONEY
1% cashback
1% cashback
On debit card spending. Max £15 p/m*
Energy bills
Energy bills
Find out if you could save with a fixed tariff
Free share offer
Free share offer
No account fee and free share dealing
4.5% 1-year Isa
4.5% 1-year Isa
Hampshire Trust with Hargreaves Lansdown
Sipp fee offer
Sipp fee offer
Get six months fee-free on a Sipp
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. *Chase: Cashback available for first year. Exceptions apply. 18+, UK residents.
