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National Savings & Investments and cuts

Writer's picture: Greg HeathGreg Heath

National Savings & Investments (NS&I) has been busy reducing its interest rates in recent months.


NS&I has roots going back to 1861, when Gladstone, then Chancellor of the Exchequer, launched the Post Office Savings Bank. NS&I’s latest quarterly results show that on 30 September 2024, it held £233.9 billion on behalf of investors. That might seem like a lot of money, but it’s a relatively small amount when considering the vast budgetary hole the current government is trying to navigate between spending and revenue.


The figures released with the Autumn 2024 Budget adjusted the 2024/25 shortfall, known as the Central Government Net Cash Requirement, to £165.1 billion. An additional £139.9 billion is required to repay existing government debt maturing in 2024/25, raising the total to over £300 billion.


Put differently, the total stock of NS&I, built up over 163 years, would suffice for approximately nine months of government financing! When considering the amount of new cash NS&I is presently generating, its effect is measured in days rather than months. In the first half of 2024/25, NS&I’s net inflow was £3.3 billion, which equates to four days of government financing.


Currently government bonds (gilts) account for the lion’s share (a projected £296.9 billion in 2024/25) of government financing. That positions NS&I as a secondary player, gathering the public’s retail pennies rather than institutions’ warehoused pounds.


Arguably, if NS&I did not exist, it would not be invented today. But it does exist, and the government would not want to see the NS&I’s £230 billion+ disappear, so it will continue to survive.


In recent months, NS&I has been cutting rates on many of its products, from Premium Bonds (prize rate now 4.0% against 4.4% in November 2024) through Income Bonds (3.44% now against 3.93% in mid-November 2024) to two-year Guaranteed Growth Bonds (3.60% now against 4.60% in early September 2024). NS&I now rarely tops the rate tables, and the recent cuts have left it languishing at the point where better returns can be found from that other government borrowing route – gilts.


If you hold NS&I investments, it is now worth checking whether they still are the right home for your cash.




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