National Savings pulls popular policies from sale

Building societies have complained about "unfair" competition from NS&I

The government savings organisation, National Savings & Investments (NS&I), has withdrawn some of its most attractive accounts.

Less than two months after they were launched, the latest issues of its three and five-year growth and income bonds have been pulled from sale.

NS&I said they had proved very popular but declined to say how much people had invested in them.

The fixed-rate accounts offered interest at between 4.3% and 4.6%.

The rates available on these policies, and their recently withdrawn one and two-year equivalents, were raised sharply on 26 October.

We feel NS&I enjoy some unique privileges and have been causing some distortions in the savings market

Building Societies Association

They proved very popular after shooting to the top of the best-buy charts available on financial comparison websites.

"It is not unusual in today's climate that savings bonds are prematurely withdrawal due to them being over subscribed," said Darren Cook of Moneyfacts.

"The current withdrawn products were not as competitive as the shorter term products which were withdrawn three weeks ago," he added.

Savings rush

The Bank of England's base rate is still at a record low of 0.5% and many variable rate savings polices on offer from banks and building societies offer less than 1% to their savers.

"Due to the popularity of the three-year and five-year issues, our sales targets for these bonds were achieved more quickly than originally expected," NS&I said.

"These changes come into effect as a consequence of NS&I's regular review of its product offerings and interest rates, to ensure NS&I continues to balance the interests of savers, the taxpayer and the stability of the wider financial services marketplace."

The government has been under pressure from building societies to make NS&I policies, which have a compete government guarantee, less competitive.

A spokeswoman for the Building Societies Association (BSA) welcomed NS&I's move.

"We feel NS&I enjoy some unique privileges and have been causing some distortions in the savings market," she said.

The societies have been struggling this year to attract fresh inflows to their own savings policies, on which they largely rely to fund their mortgage lending.

In October, building societies experienced a net outflow of savers' funds for the eighth month in a row.