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NS&I pulls inflation linked savings products

The government backed savings body has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.

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by Chris Marshall on Jul 19, 2010 at 11:45

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NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.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Both the Fixed Interest Savings Certificates and Index-linked Savings Certificates have been withdrawn.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.

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19 comments so far. Why not have your say?

Message from HMG to savers.

Up Yours!

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Message to Malcolm:

Didn't you know that politicians always inflate their way out of deficit? You should have filled your socks with the index-linked ones long ago!

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How about saving with Chinese or Indian Banks? Are they really more risky than British Banks !

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Isn't this just a message to those who save that they should spend and borrow like there's no tomorrow, just like everyone who got us into the current financial mess!!

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HIT THE NAIL ON THE HEAD TONY N. UP TO THIS ANNOUCEMENT IT WAS A NO BRAINER TO HOLD INDEX LINKED CERTS. ( £30.000) PROVIDED YOU HAD THE CAPITAL. DID YOU NOTICE VERY FEW IFA`S RECOMENDED THEM I WONDER WHY?

BETTINA

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Hi Rob, I doubt if we can have any confidence in Indian banks.

Did you know that they are recipients of aid from the FO's Overseas Aid budget?

With UK having reached Third World status themselves, why the hell are we sending aid to India? It is one of the most thriving economies, mainly because banks and insurance copmpanies have exported UK jobs there.

So if they run an economy that survives on free hand-outs from the UK (i.e. your taxes), how can you justify sending them your savings as well?

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Elizabeth Whiteside ..... NS&I don't pay commission to IFA's.

I asked my IFA to provide such safe and boring investments but he poroteted that his professional sensibilites were offended by such a suggestion, as he knew allegedly better options .... commercial property. Good as cash.

Now they pay oodles of commission.

Need you ask more?

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You can still buy index linked gilts indirectly from DMO. More flexible than the defunct NS&I certs anyway.

All is clear. Savings are to be destroyed to finance the deficit. Go borrowing. Join the crooks in power.

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People have put their money into NS&I products not, I would say, because they offer better rates (although they are certainly better than the piddling amounts proffered by the banks) but because they are SAFE. The Treasury guarantee trumps anything the banks and building societies can promise. So perhaps the next step for the wonderful people who brought you coalition government is to limit the NS&I's guarantee to £100,000 or £50,000 of deposits to bring it into line with the practice of UK banks.

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How the friggin' hell is anyone meant to retire and live off the interest from their savings? I truly dispair, after years of saving, not going into debt and looking to retire in the next while, it looks impossible on these interest levels....

Answers on a postcard please to 'No gives s--t" etc etc

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Two fingers to savers as usual.

Agree I should have seen this one coming but then hindsight is always a wonderful thing.

No doubt Mr Cameron's "Big Communities" will solve it all (LOL).

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The last safe investment guaranteed to keep its value is gone.

Unless you have a public sector index linked pension or an inflated Fred Good win type pension,you are being screwed-but the people who got us into this mess have made sure they are ok.

I think it is time we had a new pressure group or political party-anyone want to join?

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Hi IFA watcher - which country is the fourth largest investor in the Uk? you are right though it does not need UK aid nor the no brainer jobs we sent out there but we certainly need to keep our costs down by sending them out there.

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I appreciate that this Government inherited the most appalling financial position it was possible to credit but this is an appalling decision and it would appear that they are now in a complete panic.

The savings will go elsewhere and will not come back.

A move to the CPI rather than the RPI would have been less emotive.

The next thing they will phase out will probably be ISA's as they are currently excluded from income tax.

And then the Gold Reserves will go to compound the errors of the last Government.

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Please be assured that not all financial advisors are the same and I regularly advise my clients to invest in National savings certificates and was as dismayed as everyone else when I read the news this morning. It is becomming increasingly difficult to help my clients acheive returns above true inflation (the numbers are all manipulated). Beware investment markets and ensure deposit accounts are kept within the protection limits as I believe the next roller coaster ride is not far away. You should also be aware that the protection of deposit accounts does not give any guarantee of when you will get your money back, another run on banks and a government in significant debt and you may find deposits protected but illiquid.

When it comes to Governments and overseas investment you may not be aware that a whole new National pension scheme is due to come into effect from january 2012. The contract to run this National scheme went to TATA (India)!

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Oh, so this is to be fair on the poor banks is it?

With no competition I can't see their products offering much.

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It is a shame that these have been pulled.....but it is probably just the inability to structure them correctly.

There's no guarantee that that we return to inflation though.....look what happened in Japan in the early eighties.....it is possible that we move into a period of sustained deflation.

Naturally all companies want to put their prices up....and make bigger margins....but as sales dwindle they will be forced to cut prices again.

By the way not every IFA is a crook.....historically other assets classes ( equities and property ) have out-performed returns on bonds, and that's what they recommend.

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Yet another ploy by this goverment to make the masses poorer. Yet another osBOURNE identity............... I am not looking forward to the forthcoming sequels.

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Adey F

Jul 20, 2010 at 13:19

Yet another kicking for savers, But at least the banks are competetive!!!! - not .

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