NS&I cuts rates for savers

National Savings and Investments (NS&I) has cut the rates it pays savers after being deluged with customers looking for a safe haven for their cash.

The Government-backed savings group said higher sales volumes forced it to lower interest rates on some of its variable savings by up to 0.20%.

It said the move reflected its remit to maintain a consistent level of market share.

Last week nationalised bank Northern Rock was forced to withdraw some products for new customers after a rush of business left it in danger of breaching its competition commitments not to hold more than 1.5% of UK deposits.

The changes mean the Premium Bond prize fund rate will decrease from 3.40% a year to 3.25%, although it will continue to pay out over one million tax-free prizes each month, including two £1 million jackpots.

NS&I said in a statement: "In recent weeks NS&I has observed an increase in sales volumes and has taken the decision to reduce rates.

It added: "The changes aim to support NS&I in meeting its annual net financing remit, maintain a consistent level of market share and provide a positive savings experience for its customers."

Anecdotal evidence suggests savers have flooded banks and institutions that are backed by government guarantees or that are perceived to be strong in recent days.

Financial information group Moneyfacts on Monday said it had seen a 66% jump in the number of people visiting its savings pages during September, while its helpline had been inundated with calls from consumers all wanting to know if their money was safe.

The number of people opening savings accounts with Irish banks is thought to have soared since the country's government said last week that it would guarantee 100% of deposits for two years.

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