NS&I pulls inflation linked savings products

[TrueBlueTerrier]

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NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.

Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.

Both the Fixed Interest Savings Certificates and Index-linked Savings Certificates have been withdrawn. The rates paid on NS&I’s Direct Saver and Income Bonds have been cut by 0.25%.

Boost for banks and building societies

The government must balance the need to help people save, while preventing NS&I from taking too much money that would otherwise be put with Britain’s banks and building societies. The Treasury sets a target for NS&I each year, and the institution has now met this year’s aim of balancing the funds coming into NS&I with the funds leaving it.

‘NS&I sales volumes in recent months across all three products have far exceeded those either anticipated or required by NS&I,’ it stated today.

Andrew Hagger of Moneynet.co.uk, said it was a victory for banks and building societies, but another loss for savers: ‘By removing these certificates from sale and cutting rates on remaining accounts NS&I will enable the banks to improve their balance sheets, but there’s nothing positive in today’s announcement for the man on the street.

Jane Platt, NS&I's chief executive, said: 'NS&I is extremely mindful of its responsibilities given its unique place at the heart of the UK savings sector. We continue to follow a policy of acting transparently and balancing the interests of our savers, the taxpayer and the stability of the wider financial services market.'

Although inflation has dipped for the last two months, a basic rate tax payer still needs to find a savings account paying 4%, and a higher rate tax payer 5.33%, in order to stop their savings pot effectively eroding away, according to Moneyfacts.

Sales stopped already

Direct sales of Savings Certificates from NS&I and those from Post Office counters have been stopped. NS&I said postal applications received today will be honoured, but all postal applications received after midnight will be returned to the customer. The new rates on Direct Saver and Income Bonds have now come into effect.

[resperin]

hmmm i supose i'm glad i'm managed to get some money into it before it closed :( i'm sure it'll be available again once the rates are worse than other banks as per usual like their other dire products