For some months now NS&I have been offering the most competitive rates available for savers through their Direct Savings and Income Bonds products.
Unfortunately, this is soon set to change dramatically with NS&I announcing draconian cuts to rates offered across their accounts.
From 24th November the Direct Saver account will reduce from 1.0% p.a. to just 0.15%. The Direct ISA will reduce from 0.9% to 0.1% and the Investment Account will reduce from 0.8% to 0.01%.
Most damaging of all is the cut on Income Bonds which are currently paying 1.15% monthly interest, and this will reduce to an incredibly low 0.01% from 24th November.
Premium Bonds have not been spared the axe with the prize fund rate being reduced to 1% from the current 1.4% from December. Despite this cut, Premium bonds with the 1% prize fund rate remain competitive in my view and if you favour the ability to win a prize of up to £1 Million, they can reasonably be retained by most.
If, however you have NS&I Income Bonds, Direct Saver, Investment account or Direct ISA, you should review these and consider moving your savings to another savings provider.
To review other rates available you could try www.moneysavingsexpert.com if you are online or alternatively please feel free to call your adviser at Chadwick’s who will be pleased to offer you guidance.
Since the Covid crisis started I have been reluctant to advise savers with funds held in NS&I, Banks, or Building Society deposit accounts to consider increasing the amount in their investment portfolios.
This is because the short-term outlook is still so uncertain with re opening of economic activity being swiftly followed by further restrictions as we will hear from Boris later today.
Restrictions or even the mention of them can have adverse effect on investment values and we saw a fall of over 3% in the FTSE 100 just yesterday.
Nevertheless, if you are a medium to long term investor you could argue that a cash investment made into an investment portfolio now could potentially prove to be good timing although there is absolutely no guarantee of this.
With investment the usual caveat that investment values can fall as well as rise and you may get back less than you invested.
During the summer we have had several clients who have invested funds previously held in cash into investment portfolios to take advantage of what they believe is a rare opportunity given current suppressed investment values.
You may have seen the quote from Warren Buffet (The Sage of Omaha!) that he likes to invest when ‘’there is blood on the streets.’’
Still most of us are not Warren Buffet and investing cash at the current time only suits the brave opportunist or the long-term investor.
The last thing I would want to do is encourage all clients to invest cash in investment portfolios. I believe it is an individual and personal choice and I would encourage you to speak to your Chadwick’s adviser to discuss this if you think it maybe an opportunity.
As usual I would always counsel keeping sufficient cash on deposit to meet emergency fund needs and planned expenditure over the next 3-5 years.
It does pay though to regularly review the interest you are getting on your savings as the swinging NS&I cuts show, you have to be on top of this, as rates of savings interest can be shockingly low and changes happen very quickly.