NS&I reduce rates on variable rate products including Income Bonds
Date: 08/02/2017
National Savings & Investment (NS&I) have announced a reduction in the variable rates on their product range and in particular for Income Bonds that are attractive to many high net worth and ultra high net worth clients due to their government backing.
The Income Bond rate was reduced in June 2016 to the present 1.00% Gross/AER and yesterday it was announced that this will drop to 0.75% Gross/AER from 1 May 2017. Other products such as the Direct Saver account, Direct ISA and Premium Bonds have all seen rate drops too.
Steve Owen, acting Chief Executive of NS&I, explained that the reductions are due to the impact of the Bank of England base rate decrease in August 2016 from 0.50% to 0.25% following the UK’s decision to leave the European Union on 23 June 2016 that led to high currency fluctuations in the pound. The new rate effective from 1 May 2017 at 0.75% Gross/AER reflects an average of the present market conditions and rates available.
Commentary
We have expected a change in the NS&I rates since August 2016 and particularly recently, where NS&I has sat top of the market on Instant Access. The Income Bond rate at 1.00% Gross/AER, offering government protection up to £1million per person, has appeared in most client illustrations and for a while was top of the market. Indeed, we have opened more accounts in the last quarter with NS&I than ever before reflecting its temporary competitiveness. As of today, the NS&I income Bond rate can be beaten with other Instant Access rates for personal clients reaching 1.10% Gross/AER.
No action is presently due for those clients in Income Bonds as the rate reduction is not effective until 1 May 2017. We will keep you and your clients updated should better rates become available however (defined as 0.25% or above the current rate) in the interim period.
Should you wish to produce a bespoke illustration for your clients to look for alternative accounts in advance of the change then do let us know and we’ll be happy to assist.
At Cascade we continue to deliver to clients the best rates available within their security and depositor protection requirements. Our online portal is now live for online access too. Should you wish for a demonstration, do let us know and we’ll be happy to deliver.