Secure savings scheme cuts rates

NS&I says it has seen increasing sales volumes in recent weeks

A government-backed saving scheme has cut interest rates on some of its deals to maintain its share of the market.

National Savings and Investments has cut interest by up to 0.2% from Tuesday on some variable rate deals.

The move comes a few days after nationalised Northern Rock withdrew some of its savings offers.

Both have a 100% guarantee on deposits, whereas the safety threshold was increasing to £50,000 on accounts with other UK banks on Tuesday.

"In recent weeks NS&I has observed an increase in sales volumes and has taken the decision to reduce rates," a spokesman said.

"The changes aim to support NS&I in meeting its annual net financing remit, maintain a consistent level of market share and to provide a positive savings experience for its customers."

Premium Bonds

The changes mean that the Premium Bond prize fund - run by NS&I - has dropped. The prize pot has dropped from £104m to £100m, although two £1m tax-free jackpot prizes will still be awarded each month.

The odds of winning a prize with a £1 Premium Bond remains the same at 22,000 to one.

The NS&I website advertises the 100% guarantee on savings - saying "you can rest assured that all your capital is 100% secure, however much you invest".

Northern Rock agreed not to advertise its 100% guarantee when it was nationalised.

On Thursday, it said that it had seen a "sizeable inflow" of deposits owing to financial turbulence and so cut some of its deals.

As part of its nationalisation deal, it must cap its market share of UK retail deposit balances at 1.5%.