Interest rates set to drop on NS&I Income Bonds
06 October 20  /  Insights

We’ve recommended NS&I Income Bonds many times as a safe, secure way to invest your money and also due to the reasonable rates of interest offered. On 21st September 2020, however, NS&I announced they will be dramatically reducing interest rates on their savings accounts, to take effect from 24th November 2020. Given this news, our message is simple: if you want to take advantage of NS&I higher interest rates, especially on the Income Bonds, you need to act now.
A risk-free investment

With easy access and good rates of interest, NS&I has always been a good option for investors looking to invest in a product that’s safe and reliable, with a reasonable rate of return, and we’ve recommended investment in NS&I Income Bonds to many clients over recent years and months.
Given the low interest rates of so many financial savings products on the market, NS&I’s move to lower their interest rates is hardly unexpected, but with this advance warning, there is still a window of opportunity for those looking to maximise their returns from cash.
The current rate on NS&I Income Bonds is 1.16%. After 24th November 2020, it’s set to drop to 0.01%. Although this is disappointing news, we think it’s positive that NS&I have kept their rates high for as long as they have, especially with the Bank of England base rate remaining at 0.1%.

And its not just the Income Bond

The Income bond has been popular with our clients looking for an environment where they can maximise interest rates and have the backing of the Treasury. However, this is not the only account to get a huge reduction. The majority of accounts are effected, as you can see in the chart below:

Product Current rate Rate from 24 November 2020
Direct Saver 1% 0.15%
Investment Account 0.8% 0.01%
Income Bonds 1.15% gross / 1.16% AER 0.01%
Direct ISA 0.9% 0.1%
Junior ISA  3.25% 1.5%
Guaranteed Growth Bonds (1 year) 1.1% 0.1%
Guaranteed Growth Bonds (2 year) 1.2% 0.15%
Guaranteed Growth Bonds (3 year) 1.3% 0.4%
Guaranteed Growth Bonds (5 year) 1.65% 0.55%
Guaranteed Income Bonds (1 year) 1.05% gross / 1.06% AER 0.06%
Guaranteed Income Bonds (2 year) 1.15% gross / 1.16% AER 0.11%
Guaranteed Income Bonds (3 year) 1.25% gross / 1.26% AER 0.36%
Guaranteed Income Bonds (5 year) 1.6% gross / 1.61% AER 0.51%
Fixed Interest Savings Certificates (2 year) 1.15% 0.1%
Fixed Interest Savings Certificates (5 year) 1.6% 0.5%


Avoid risky, higher interest products

Of course, there will always be products offering higher interest rates, but these tend to come with a higher rate of risk and we would always advise caution. Certainly, we would not recommend moving your money if you don’t know about the credit worthiness of the bank or institution involved, or that you consider risky investment options, such as corporate bonds or high-yielding company shares. You may argue that your money is protected under the Financial Services Compensation Scheme (FSCS), but don’t forget this operates ‘per person, per institution’, and with many under the umbrella of one parent company, it can restrict the protection available.
Act now

Any decision you make regarding your savings and moving your money should always be within the context of your long term financial plan and also fit within your stated tolerance to taking risk. As such, we would ask that you keep us part of your thinking process and discuss your thoughts with us before taking action. We want to make sure you make the best choice for you and your current circumstances.

If you would like to discuss anything with us, please get in touch on 01865 208000 or email us at:

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