Government bank piles on pain for savers
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Your support makes all the difference.Inflation-linked savings certificates have been withdrawn by National Savings & Investments after a surge of investors threatened to push the Government-backed savings bank over its financial targets. Savers have been flocking to the accounts as they offer interest priced at 1 percentage point above the inflation rate, which currently stands at 5 per cent.
That left certificates paying 6 per cent in a current low-rate environment where fixed interest savings elsewhere offered top rates of around 3 per cent over two years. The rate helped NS&I pull in a near-record £5.4bn of funds in the first quarter of 2010, according to its latest quarterly results published yesterday. Over the year to the end of March it attracted £18.1bn-worth of savers cash.
"We've seen significant amounts of money invested into these products over recent months and so we've taken the decision to withdraw Savings Certificates from general sale," explained Jane Platt, the chief executive of NS&I.
Savings Certificates were withdrawn from sale at midnight on Monday morning, although any postal applications received by midnight last night will be honoured.
NS&I, which is also cutting several rates, was criticised by building societies and banks last year after it launched a one-year bond paying 3.95 per cent, 0.25 percentage points more than anyone else at the time. Although the bond was withdrawn after just 24 days, high street banks accused National Savings of using its government backing to distort the market.
"By removing index-linked certificates from sale and cutting rates on remaining accounts NS&I will enable the banks to improve their balance sheets, but there's nothing positive in today's announcement for the man on the street," said Andrew Hagger of savings analyst Moneynet.
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