National Savings reduces rate to safeguard competition
National Savings & Investment is cutting the interest rate on its Direct Saver account from 1.75% to 1.5% with effect from today, because the account is too popular.
Government-backed NS&I has already substantially exceeded its target to raise £2bn from savers in the 2011/12 financial year and now needs to slow the rate of deposits into its accounts in order to protect competition in the market place.
The Building Societies Association (BSA) has welcomed the interest rate cut.
It has previously warned that NS&I has had an unfair advantage over building societies since the onset of the banking crisis in 2007.
Since then, NS&I has attracted more than 10% of new savings, with customers seeing it as a safe place to keep their cash.
Adrian Coles of the BSA said: “It [NS&I] has unique advantages because it can offer a 100% state-backed guarantee and building societies have been losing funds to NS&I.”
NS&I has already raised £4.8bn during 2011/12 and hopes the lower interest rate will help to cut this back to £4.5bn by the end of the financial year.
Jane Platt, the chief executive of NS&I, said “Since November we have seen an increase in customer deposits.
“This has been driven by a relatively small number of savers depositing large amounts of money, particularly into our Direct Saver account.
“We have also seen a decrease in the number of customers withdrawing their money from products across our range.”
The changes to the Direct Saver account will affect just under 20,000 customers.
Earlier this month NS&I experienced problems with its website, with customers having to phone the organisation’s call centre to carry out transactions.
The agency quickly resolved the technical issue which caused the site to fail completely to load on customers’ computers.
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