Half a million savers trying to protect their cash from the erosive effect of inflation will see their returns plummet when NS&I, the government-backed savings provider, changes the way it calculates interest.
At present, the interest rate on index-linked savings certificates is based on inflation measured by the retail prices index (RPI), currently 2.5%. But from 1 May, savers who renew their certificate will see their returns switch to the lower consumer prices index (CPI), which is now 1.9%. Almost £20 billion is deposited in these certificates, mostly by older account holders, according to the NS&I 2017-18 Annual Report.
In a further move by NS&I, changes to Guaranteed Growth and Guaranteed Income Bonds will affect nearly 700,000 savers with £17 billion deposited, according to the NS&I 2017-18 Annual Report. From May, new savers will no longer be able to cash in their bonds before the end of the term. The change will also affect when tax is paid on the interest. This could mean higher tax bills when the bonds mature, as savers will no longer be able use their annual Personal Savings Allowance against each yearly interest payment.
With few cash alternatives offering returns that match or beat inflation, the government-backed schemes are still a valid consideration for cautious savers. But with interest rate rises now a more distant prospect given the Brexit delay, cash savers continue to be offered little respite.
Click this link to access the petition to stop this.