Best savings accounts for savers hit by ns&i rate cuts

* NS&I IS CUTTING RATES IN RESPONSE TO SAVERS POURING IN £38.3BN IN JUST SIX MONTHS  * SOME SAVERS WILL EARN JUST 0.01% INTEREST DOWN FROM 1.15%  * WE ROUND UP THE BEST ACCOUNTS FOR

EASY-ACCESS, FIXED-RATE AND TAX-FREE DEALS * WE ALSO EXPLAIN WHY SAVERS MIGHT ACTUALLY BE BETTER OFF STICKING WITH PREMIUM BONDS EVEN THOUGH THE NUMBER OF AVAILABLE PRIZES WILL FALL  By

GEORGE NIXON FOR THISISMONEY.CO.UK Updated: 07:34 EDT, 24 November 2020 Up to 25million savers with National Savings and Investments are likely to see the interest paid on their money

plummet today, if they haven't already shifted it elsewhere.  The Treasury-backed bank is hitting savers hard to seemingly try and force them out the door after they deposited

£38.3billion into it between April and September, shattering its up-scaled fundraising target for the year in just six months. Cuts to its fixed and variable rate deals, many of which were

best buys, were initially announced at the end of September, and since then the fallout has blown a hole through the savings market.  Rates on one-year fixed-rate bonds have hit an all-time

low, while rates on the best available alternatives we gave to NS&I savers when the cuts were first announced have plunged. For example, the best easy-access tax-free cash Isa available

on 22 September was 0.96 per cent, now it is just 0.65 per cent.  However, with savers set to see the interest on their money plunge to as little as 0.01 per cent in some cases, they should

still make a move. HSBC CUT ITS REGULAR SAVER:  In another blow for short-changed savers, HSBC and First Direct have cut the rates they pay on their previously market-leading regular savings

accounts. In unannounced cuts that came into effect on the same day as NS&I's, the two banks slashed the rate paid on up to £300 of savings each month from 2.75 per cent to 1 per

cent. Both paid 5 per cent as recently as October last year.  Research suggests they will, with NS&I savers far likelier than the average customer to switch to a better-paying account,

according to research published last month by This is Money.  And close to a quarter of 500 NS&I savers told investment platform AJ Bell they would switch to another bank or building

society, even if 57 per cent planned to stay put with NS&I. But if short-changed savers wish to move, where can they go? This is Money rounds up the best rates. NS&I savings deals

facing cuts  ACCOUNT  CURRENT RATE  RATE ORIGINALLY PLANNED FOR MAY 2020  RATE FROM 24 NOVEMBER 2020 UNDER LATEST CUTS  Direct saver 1% 0.7%  0.15%  Investment account  0.8%  0.6%  0.01%

Income bonds  1.15%  0.7%  0.01%  Direct Isa 0.9%  N/A  0.1%  Junior Isa  3.25%    1.5%  Guaranteed growth bonds (1 year)    1.1% 0.1%  Guaranteed growth bonds (2 year)    1.2%  0.15% 

Guaranteed growth bonds (3 year)    1.3%  0.4%  Guaranteed growth bonds (5 year)    1.65%  0.55%  Guaranteed income bonds (1 year)    1.05%  0.06%  Guaranteed income bonds (2 year)  1.15% 

0.11%  Guaranteed income bonds (3 year)    1.25%  0.36%  Guaranteed income bonds (5 year)    1.6%  0.51%  Fixed interest savings certificates (2 year)    1.15%  0.1%  Fixed interest savings

certificates (5 year)    1.6%  0.5%  Source: NS&I    Holders of NS&I's Direct Saver will see the rate they are paid fall from 1 per cent to 0.15 per cent, £85 a year in interest

on savings of £10,000. Best buy rates have fallen from 1.2 per cent in late September to 0.7 per cent now, with the highest-paying account on the market offered by Saga, whose accounts are

provided by Goldman Sachs. That 0.7 per cent does include a 0.15 per cent 12-month bonus however, cutting the rate to 0.55 per cent after a year. It can be opened online with £1, while the

best account available offline comes from Kent Reliance. That account pays 0.5 per cent on balances of £1,000 or more and can be opened by post. How have savings rates changed since NS&I

cut its rates?   1 SEPTEMBER   21 SEPTEMBER  28 SEPTEMBER  1 OCTOBER  14 OCTOBER 29 OCTOBER Easy-access top rate  1.15%  1.2%  1.1%  1.05%  0.96%  0.8%  Easy-access top five average rate 

0.91% 1.08%  1%  0.9%  0.87%  0.76%  One-year fixed-rate top rate  1.2%  1.3%  1.21%  1.18%  1.18%  0.95%  One-year fixed-rate top five average rate 1.14%  1.24%  1.18%  1.16%  1.06%  0.93%

  Easy-access Isa top rate  0.9%  0.96% 1%  1%  0.96%  0.95%  Easy-access Isa top five average rate 0.78%  0.92%  0.97%  0.92%  0.85%  0.76%  One-year fixed-rate Isa top rate  0.85%  1.02% 

0.93%  0.92%  0.82%  0.8%  One-year fixed-rate Isa top five average rate  0.77%  0.96%  0.91%  0.87%  0.79%  0.74%  Source: Savings Champion  No savers are set to be hit harder by

NS&I's cuts than the more than 186,000 holders of its Income Bonds, who will go from receiving 1.15 per cent interest each month to just 0.01 per cent. And because of the way the

Treasury-backed bank's computers work, those savers with £646 or less in their accounts will no longer earn anything, as they would be set to earn less than 0.5p interest each month.

Savers however will see a big hit even if they move away from NS&I, with the best easy-access deal offering interest on a monthly basis coming from Aldermore Bank and Kent Reliance. How

much will savers with £5,000 lose a year under NS&I's changes? ACCOUNT INTEREST EARNED ON CURRENT RATE PAID BY NS&I INTEREST EARNED ON NS&I RATE FROM 24 NOVEMBER INTEREST

EARNED ON BEST RATE AVAILABLE NOW Easy-access  £50 £7.50  £35 Monthly income  £57.50 a month  50p a month  £25 a month  Cash Isa  £45  £5  £32.50  One-year fixed-rate  £55  £5  £54  Two-year

fixed-rate  £60  £7.50  £57.50  Both pay 0.5 per cent, which means savers will see their income fall more than half even with the best-paying account around, but that is a reflection of

where savings rates are right now.  Both can be opened with £1,000, with Aldermore able to be opened online and Kent Reliance by post as well. TAX-FREE INVESTING?  Savers sick of rock bottom

rates and constant cuts may be thinking of other ways to earn interest. Some 4.6 per cent of NS&I savers surveyed by DIY investment platform AJ Bell said they planned on investing their

savings in response to NS&I's cuts.  While more of a long-term exercise, investing, rather than keeping money in cash, is one way of potentially trying to achieve greater returns.

   And it can be done tax-free through a stocks and shares Isa. First-time investors can head to This is Money's DIY investing guide and our list of the best tax-free investment

platforms for ideas and inspiration. Cash Isa rates had actually bounced back somewhat before NS&I's rate cuts were announced, with the bank's Direct Isa paying 0.9 per cent no

longer at the top of the best buy tables by the time savers were told it would be cut to 0.1 per cent. However, where savers before could match or beat that rate with four others, now the

best available easy-access rate for those looking to move their money away pays nearly a third less, at 0.65 per cent. It is offered by Paragon Bank and the Isa accepts transfers, but limits

savers to three withdrawals a year. Offline, the best available rate comes from Skipton Building Society.  It pays 0.6 per cent but also comes with a catch, in that the rate falls a further

0.2 percentage points after the expiration of a 12-month bonus rate. As mentioned above, fixed-rate bonds have taken a battering this year, with rates on 12-month terms having never been

lower than this year. Nonetheless, NS&I savers who hold money in some of its historical products like its Guaranteed Growth and Income Bonds and its two and five-year fixed-interest

savings certificates, which were already cut in May, will also benefit from moving elsewhere. How much will savers with £10,000 lose a year under NS&I's changes? ACCOUNT INTEREST

EARNED ON CURRENT RATE PAID BY NS&I INTEREST EARNED ON NS&I RATE FROM 24 NOVEMBER INTEREST EARNED ON BEST RATE AVAILABLE NOW Easy-access  £100 £15 £70  Monthly income  £115 a month 

£1 a month  £50 a month  Cash Isa  £90  £10  £65  One-year fixed-rate  £110  £10  £108 Two-year fixed-rate  £120  £15  £115 Savers should be wary of locking into anything longer than a

24-month bond, however, because rates are incredibly low and there is little payoff for doing so, especially if inflation returns to normal levels. NS&I's one and two-year Growth

Bonds, its best available accounts on shorter term lengths, will go from paying 1.1 per cent and 1.2 per cent to 0.1 per cent and 0.15 per cent, respectively. Even with fixed rates at

all-time lows, those can be comfortably beaten. Sharia bank Al Rayan pays 1.08 per cent on a one-year fixed-rate and 1.15 per cent on a two-year, with the accounts able to be open online, by

phone and in-branch with £5,000. For those with NS&I's Guaranteed Income Bonds, fixed-term accounts paying monthly interest, these Al Rayan accounts also offer the option of

quarterly interest.  However, being Sharia, they pay an expected profit rate rather than interest, although in practice it is largely the same for savers. How much will savers with £50,000

lose a year under NS&I's changes? ACCOUNT INTEREST EARNED ON CURRENT RATE PAID BY NS&I INTEREST EARNED ON NS&I RATE FROM 24 NOVEMBER INTEREST EARNED ON BEST RATE AVAILABLE

NOW Easy-access  £500 £75  £350 Monthly income  £575 a month  £5 a month  £250 a month  Cash Isa  £450  £50  £325  One-year fixed-rate  £550  £50  £540 Two-year fixed-rate  £600  £15  £575

Even children will not escape NS&I's raft of cuts, with its tax-free Junior Isa set to be slashed from a market-leading 3.25 per cent to 1.5 per cent.  This works out as a loss of

£157.50 a year on the full £9,000 Junior Isa allowance and £78.75 a year on £4,500. On a £5,000 lump sum, the fall in interest would see a child saver end up receiving £491.78 less over half

a decade. The best rate available on the market now is 2.95 per cent and is offered by Coventry Building Society.  It can be opened by post, in-branch or over the phone with £1, and accepts

transfers from an existing Junior Isa or Child Trust Fund.  A lump sum of £5,000 would earn £793.62 in interest over five years, slightly lower than the £880.95 earned over half a decade at

NS&I's previous rate, but a lot more than what it is paying savers now. SHOULD YOU STICK WITH PREMIUM BONDS? Britain's best-loved savings product Premium Bonds are also facing

the chop.  From the December draw, the odds of winning anything will lengthen from 24,500 to one to 34,500 to one, with the estimated number of total prizes won falling by 1million. It

means there will be fewer available prizes in the monthly draw for all values except the £1million jackpot, with two still handed out each month. But despite the cuts, the effective annual

'prize fund rate', the return savers are estimated to receive on the up to £50,000 they can hold tax-free, will still be 1 per cent. While savers are not guaranteed this, it is

still an attractive alternative to falling easy-access rates, especially as any winnings are tax-free. How fewer Premium Bondholders will win prizes from December VALUE OF PRIZES  NUMBER OF

PRIZES IN SEPTEMBER 2020  NUMBER OF ESTIMATED PRIZES IN MAY 2020 UNDER ORIGINAL CUTS PLANNED IN FEBRUARY  NUMBER OF ESTIMATED PRIZES IN DECEMBER 2020 £1,000,000 2 2  2  £100,000  7  5  4 

£50,000  14  11  9  £25,000  28 21  16  £10,000  71  54  43  £5,000  140  106  83  £1,000  2,204 1,857  1,639  £500  6,612 5,571  4,917  £100  30,244  13,448  26,637  £50  30,244  13,448 

26,637  £25 3,786,474  3,262,871  2,790,269  Total:  3,856,040  3,297,394  2,850,256  Source: NS&I    Anna Bowes, co-founder of the analysts Savings Champion, said: 'With interest

rates so low, for many the risk of winning few or even no prizes on their Premium Bonds is far less significant than when interest that can be earned elsewhere is higher. 'Although

it's disappointing that there will be far few prizes up for grabs, I would expect Premium Bonds to remain popular. After all, you just never know.' Offline savers who want to stick

with or save into Premium Bonds should be aware of the fact that NS&I is phasing out paper prize cheques between December and March, with savers having to provide their bank details for

prizes to be paid into. All rates correct as of 23rd November 2020 - rates in the current environment can chop and change fast.  WATCH OUT Savers looking for better returns on their money

may come across adverts offering promises of guaranteed inflation-beating returns in the high single and even double digits per cent.  Quite often these can be found on social media and

sponsored search engine results. However, savers should always be careful as these accounts are usually high-risk investment bonds where your money is not protected, or even scams.  Always

beware promises of investments being 'safe', 'secure' and 'asset-backed'  As a saver, you should always understand where your money is invested and whether the

rate you are being offered is too good to be true and ensure it is in a cash savings account with a bank if you simply want somewhere to park your money. Savers can use This is Money's

best buy tables to find the highest-paying cash savings accounts available, while they can use the Financial Services Compensation Scheme's website to check if deposits with a bank or

provider are truly protected up to £85,000.