Success of NS&I bonds causes misery for savers
As reported last week, the new NS&I Pensioner Bonds were launched to great fanfare and are still expected to sell out, with many savers unable to get through on phone lines to make their investment.
However, it seems the launch of these bonds, which are able to offer market busting rates owing to £10bn Treasury backing, has had another, less saver-friendly side effect. Unable to compete, it seems other banks are actually cutting their savings rates, with more than 100 rates cut so far in 2015.
Big banks and building societies including Lloyds Bank, Royal Bank of Scotland, Halifax, the Post Office and Skipton Building Society are among those to have slashed rates recently- in some cases, interest rates have been cut in half.
The recent fall in inflation has compounded the problem and means that a widely-predicted rise in the Bank of England base rate may now be delayed. Of course, when the base rate does go up, banks will be under pressure to increase savings rates offered, so banks may be taking the low inflation to drop rates now in advance of raising them later on.
So far this year, MoneyMail has found more than 100 cuts on variable-rate savings accounts, including ISAs and children’s accounts. While most of the cuts are less than one percent, hardly surprising given the pitiful rates to start with, the worst offender title going to Skipton Building Society whose Bonus Cash Isa rate has been halved from 2 per cent to 1 per cent. Last Thursday, Halifax cut the rate on their Junior Isa from 6 per cent to 4 per cent. But there is one exception to prove the rule- Virgin Money’s one-year fixed-rate cash Isa is up by a tiny fraction, from 1.65 per cent to 1.7 per cent.
Susan Hannums, director at the independent website Savings Champion said: “This is one of the toughest periods for savers in living memory. We hoped the launch of the pensioner bonds would kick-start this year as a better one for savers with much-needed competition, as banks and building societies try to hold on to savers rather than lose out to National Savings.” However, she concluded that “early indications haven't been good, with more rate cuts for both new and existing savers.”