Interest rates on other fixed and variable rate products changed following decreases in base rate and falls in gilt yields
NS&I announced that it is holding the current Premium Bond prize fund rate at 1.8% (the rate implemented after the November base rate change last year) for at least the February and March 2009 prize draws. A new £25 Premium Bond prize category is to be created which could be introduced in the future, but not before 1 April 2009, and used alongside the existing prize fund categories (ranging from £50 to £1 million). This is because our customers generally state that frequent prize wins are particularly important to them.
NS&I has also announced a reduction to the rates paid on most of its other variable rate savings products by up to 1% and on Income Bonds by 0.50%. These changes have been made following the Bank of England base rate falling to 1.5%. This is the first change NS&I has made to interest rates following the December 2008 and January 2009 Bank of England base rate reductions of 1% and 0.5% respectively. Revised interest rates will come into effect from 21 January 2009.
NS&I is also amending rates on its fixed-rate savings products by up to 1.85% as a consequence of gilt yields falling since it last adjusted its fixed interest rates in September 2008. This change will not affect savings already invested in NS&I's fixed rate savings range.
NS&I's fixed savings rates take into account the returns on gilts, whilst its variable savings rates are affected by changes to the Bank of England base rate.
Peter Cornish, Director of Customer Offer, NS&I, said: "Premium Bonds are unique. From listening to our customers we know how important winning prizes regularly is to them. We are holding the Premium Bond prize fund rate at 1.8% - the level announced in November last year - for at least the February and March prize draws. And we are giving ourselves the ability to offer a new £25 prize category in the future.
"We always set our interest rates in a fair and measured way. Since the changes to the base rate last December we have taken the time to understand the full impact of any potential changes on our customers."
To give it the flexibility to introduce a £25 prize, NS&I is amending the terms and conditions of Premium Bonds.
As always, NS&I will communicate all of these changes to customers via a range of outlets, including: press advertisements, NS&I's website, as well as putting an updated Premium Bond brochure in all Post Offices and most branches of WH Smith throughout the UK.
