This week’s Autumn Statement gave National Savings & Investment (NS&I) the green light to take in more money from savers, raising hopes that interest rates on their most popular accounts could rise in 2014.
NS&I interest rate cuts
Each year the Government stipulates the amount of cash NS&I can take in as it tries to balance the interests of savers and banks.
As savers have searched for a secure home for their cash over the past few years, and all money held with NS&I is 100% guaranteed, savers flocked to NS&I, leading to interest rate cuts and products being withdrawn in an effort to deter savers.
Over the past two years the popular NS&I Index Linked Certificates, which offered a tax-free return linked to inflation, have been withdrawn to new savers, whilst the return offered by Premium Bonds and Income Bonds have been cut.
NS&I funding target increased
However, in last week’s Autumn Statement the Government increased NS&I’s financing target, the balance between money coming in and leaving, to £2 billion, from zero in previous years. This has led to speculation that NS&I might push up interest rates, or indeed even reinstate some products. as they look to attract additional cash from savers.
When asked about their intentions, NS&I wouldn’t comment on their plans for 2014, but did say the Index Linked Certificates would definitely not be reintroduced this year.
Commenting on the change, Jane Platt, Chief Executive of NS&I, said: “We know that we occupy a unique position at the heart of the UK savings sector. Today’s revisions to our net financing and value indicator targets mean that we can continue to offer our savers rates which we believe are fair and balance this alongside both the long-term delivery of cost-effective financing and our role in supporting stability across the financial services sector.”