National Savings & Investments has slashed its fixed saving rates for the fourth time in just three months - just as Northern Rock launches the highest paying bond around.
The news will be a bitter pill to swallow for those Northern Rock savers who switched more than £2 billion to NS&I amid fears of a financial meltdown last year.
Since then, Northern Rock has been desperately attracting more funds by offering table topping rates, whereas National Savings has been blighted by abysmal gilt yields, which have in turn been passed on to customers as abysmal saving rates.
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Half the rates at NS&Why
This week’s decision to slash its fixed saving bond rates by between 0.2% and 0.5% is merely the latest in a series from National Savings.
While it offered a decent 5.2% rate on its one year bond last October (for amounts between £500 and £20,000), the rate now sits at a paltry 3.7%. Compare this to Northern Rock, which has just launched a 6.9% one year product.
As a straight comparison, a £10,000 investment with Northern Rock would earn you £712 interest over the year, while at NS&I you would only accrue £376.
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More security now on offer
Obviously the main reason for the saver exodus from Northern Rock was the fact that people feared their money could be lost. And with the NS&I offering a 100% capital guarantee, the government backed institution was an obviously first choice for jittery savers.
But with savings of up to £32,000 protected by the financial services compensation scheme, all but the most high level savers can breathe easy, regardless of where they bank their money in the UK.
So there’s no reason why savers should languish on the sub par rates on offer at NS&I. Anyone looking to take advantage of Northern Rock’s one year bond should act fast, though: Alliance & Leicester launched an even more attractive 7% product earlier this month, only for them to pull it just five days later due to excessive demand.
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