National Savings rates cut again

The return on government savings has been cut by lower interest rates.

Interest rates on some National Savings policies are being reduced again after the Bank of England cut its official rate from 1.5% to 1% last month.

The knock-on effect is a cut in most variable rate national savings accounts by up to 0.75%, from 19 February.

Up to two million people have variable rate National Savings accounts.

Fixed-rate deals for new savers are being cut by up to 1.35%. Premium Bond prizes will remain unchanged until at least March.

"National Savings & Investments (NS&I) is reducing rates on its fixed-rate savings products by up to 1.35% as a consequence of falls in gilt yields by up to 3.5% since September 2008," said a spokesman.

"NS&I's fixed savings rates take into account the returns on gilts, whilst its variable savings rates are affected by changes to the Bank of England base rate," he added.

Last month cuts of up to 1% were made in the returns on NS&I's variable rate accounts, such as its easy access savings accounts and its ISAs.

The interest on its income bonds went down by half a percentage point at the same time.

They were the first reductions made on the variable rate policies since last November.

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