NS&I slashed rates after attracting big sums of money from savers since the pandemic struck
Savers withdrew a staggering £6.2billion from National Savings & Investments accounts in November after it slashed interest rates on some of its most popular products.
Deposits with the Treasury-backed bank were ‘historically weak’ in November, the Bank of England said as it unveiled its latest money and credit report.
The exodus from NS&I comes as UK households saved more with banks and building societies during the month – a total of £17.6billion, up 38 per cent from the £12.7billion saved in October.
NS&I delivered a crushing blow to savers in October last year when it announced deep cuts to a number of accounts, which were then introduced at the end of November.
Some savers went from earning a market-leading rate of 1.15 per cent interest each month to just 0.01 per cent, while holders of Britain’s savings product Premium Bonds now have less of a chance of winning a prize.
NS&I slashed rates after attracting big sums of money from interest-starved savers since the pandemic struck, overshooting its annual target. But now it looks like the Treasury-backed bank may be finding itself below its £35billion funding target for the year.
NS&I saw inflows of £38.3billion in the first six months of the financial year, from April to the end of September.
But after withdrawals of £500million in October and of £6.2billion in November, it is left with around £31.6billion – although it still has until the end of March to make good any shortfall.
Laith Khalaf, financial analyst at AJ Bell, said: The scale of the withdrawals does raise the question whether NS&I has overegged the pudding with its rate cuts. It’s never an easy job deciding what rate will attract the right amount of money, but that’s been made even harder by the distortive effect of the pandemic on people’s savings habits.