JEFF PRESTRIDGE: NS&I has let us down

National Savings & Investments is one of the country’s most trusted financial brands, but it doesn’t mean the Government-owned bank always acts in the best interests of its 25 million savers. Far from it.

Having rightly attracted criticism in the past year (a barrage of it from this newspaper) for cutting the rate on its cash-based Direct Isa – at a time when the Bank of England had ratcheted up base rate by 0.25 percentage points to 0.75 per cent – it has now dropped another clanger. 

This time, it has withdrawn its popular Guaranteed Income and Guaranteed Growth Bonds from sale.

Depressingly, as far as hard-pressed savers are concerned, I wouldn’t be surprised if more bad NS&I news is just around the corner. 

An inevitable result, sadly, of the constraints that the savings organisation is having to work under – in the form of tight-fitting financial handcuffs applied by the Treasury – and the continued uncertain political and economic backdrop that could at some stage trigger a reduction in base rate.

Currently, it is cheaper for the Government to borrow money via the wholesale money markets – through the issuing of low-yielding gilts – than it is through National Savings. 

And when this happens, the organisation is strongly encouraged (some would say compelled by Government) to turn off the demand tap, irrespective of the savings needs of NS&I customers. 

It does this in two ways – by withdrawing products from general sale as it has just done with the one and three-year guaranteed bonds, or by slashing interest rates. We’ve had part one, part two could follow shortly.

On the cards is a cut in the 1.15 per cent interest it currently pays holders of Income Bonds, popular with pensioners because income is paid monthly. 

Savers with cash in its Direct Isa could also see their 0.9 per cent interest tickled down while the one per cent being paid to Direct Saver customers looks vulnerable.

Although NS&I is paying a better interest rate on its cash-based Junior Isa (3.25 per cent, a rate currently only beaten by Coventry Building Society), the organisation needs to tread carefully. 

Any cut would fly in the face of the organisation’s mission to attract younger customers and encourage the savings culture among today’s youth. An objective fiercely promoted under current NS&I chief executive Ian Ackerley.

On similar grounds, it should leave ever popular Premium Bonds well alone. Again, under Ackerley’s direction, a big effort has been made to make Premium Bonds more child-friendly with the right to buy them as gifts for under-16s recently extended from parents and grandparents to all adults – godparents, aunts, uncles and close family friends.

Last month, in announcing this move, Ackerley said: ‘By opening up Premium Bonds to more people, we hope to encourage inter-generational saving, kick-starting young people’s savings habits and making National Savings an integral part of young people’s savings journey.’

To say that, and then follow it up with a cut in the current average annual prize rate of 1.4 per cent, would smack of hypocrisy. While NS&I provides savers 100 per cent capital security – an assurance no other financial institution in this country can offer on savings in excess of £85,000 – it does not immune its customers from receiving bad news. 

So be warned: rate cuts are coming as sure as Jeremy Corbyn is unfit to govern this country. So start shopping around in search of better savings deals – they do exist. The website Savings Champion is a good starting point. 

Woodford’s accounts make for tough reading

The latest accounts for investment fund Woodford Equity Income make for sorry reading as we report in today’s Wealth section.

If you’re an investor in this miserable fund, I do urge you to read the article, although it will probably make your blood boil as manager Neil Woodford continues to blame everyone bar himself for the investment basket case that is now Equity Income.

Although Woodford’s impressive investment track record at his former employer Invesco is indisputable, he has now become a liability at Equity Income – and a law unto himself. 

Surely, it is time for the sleeping giant that is City regulator the Financial Conduct Authority to awake from its summer slumbers and act in the best interests of investors trapped in this broken £3.1 billion fund.