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NS&I announces unprecedentedly large rate cuts on 24 Nov. A devastating blow for savers


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That 1.0% figure is the one quoted on the NS&I rates page.  I would like to know more about the volatility in returns.  For example:  if someone were to invest £100,000 - then they'd expect £1000 return per year - but it would not be regular.  I'd like to know the distribution of sizes of payouts.  If  NS&I premium bonds paid a single saver £100m once every 3 years, that'd be a problem.  If the bulk of premium bond prizes were between £50 and £500, then - perhaps - that would not be.

Any idea where to get the breakdown?

They're basically all £25 prizes, I've never won anything else. The last six months I've won 19 £25 prizes and my husband won 12, both on max deposit.

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They're basically all £25 prizes, I've never won anything else. The last six months I've won 19 £25 prizes and my husband won 12, both on max deposit.

Wifey won a £1000 prize a few years ago, she was maxed out on bonds. i typically win £25 a month currently

 

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TSB_logo.png  
     
  We’re changing the interest rate on your Plus account.  
     
  Dear Rant,  
     
  We wanted to let you know that from 2 December 2020, we’re reducing the interest rate on your Plus account from 1.50% AER* to 0% AER.

Ouch!!

Cut from 5% in July 2019..... https://www.thisismoney.co.uk/money/saving/article-8012395/TSB-announces-second-Classic-Plus-rate-cut-1-5-May.html

to 0 percent from December 2020....... https://www.moneysavingexpert.com/news/2020/09/tsb-to-scrap-classic-plus-current-account-interest/ 

Takes the p**s.

 

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All I know about economics is 'what do you get if you put 10 economists in a room?.....11 opinions' :)

You are describing the substitution theory and I guess all I am saying is now rates are so low it is impossible to substitute with more savings and it is to encourage yield chasing....keep the DOW pumping. But I appreciate that is one of eleven opinions. 

I still wonder if this rate drop is to support banks who cant compete with 1.16%. It may also allow banks to offer super low mortgage rates and encourage banks to pass on that all important cheap mortgage rate. They won't of course they will try squeeze what little profit they can get.....but no harm in the government hoping. 

I dunno, I'm seeing 5 yr fixed rate mortgages for 0.5% less than my 2yr fixed rate I took out last year. 

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I have £44k and win about 2 x £25 per month on average. 

Whatever way I look at it, until now I've seen about 1.3% give or take 0.1 or so. 

Wife and I maxed out at £100K for last 2 years. The prize rate has been 1.4% consistently and our returns have been 1.3%. That's entirely expected given that a few lucky folk will have shared out the other 0.1% between them in £1M prizes, etc.

We bounce around between £0 and £200 each month and expect around £100 on average.

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I dunno, I'm seeing 5 yr fixed rate mortgages for 0.5% less than my 2yr fixed rate I took out last year. 

Fair enough,

I speculate there will be conversations going on behind closed door. Ie make sure you pass the low mortgage rates onto customer. And to do that we will floor savings rates. 

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Wife and I maxed out at £100K for last 2 years. The prize rate has been 1.4% consistently and our returns have been 1.3%. That's entirely expected given that a few lucky folk will have shared out the other 0.1% between them in £1M prizes, etc.

We bounce around between £0 and £200 each month and expect around £100 on average.

Not sure how the £1m impacts overall % paid but in terms of winning...my experience is exactly the same as you describe but with a £1000 win thrown in one month. (so they must exist but clearly rare) 😉

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That 1.0% figure is the one quoted on the NS&I rates page.  I would like to know more about the volatility in returns.  For example:  if someone were to invest £100,000 - then they'd expect £1000 return per year - but it would not be regular.  I'd like to know the distribution of sizes of payouts.  If  NS&I premium bonds paid a single saver £100m once every 3 years, that'd be a problem.  If the bulk of premium bond prizes were between £50 and £500, then - perhaps - that would not be.

Any idea where to get the breakdown?

I've seen it somewhere, but essentially there a small amount goes into the million pound prize, then the rest is split between the small and medium prizes. With the 1% interest rate, the chance of winning any prize (most likely £25) is about 1 in 40,000 so if you max out, you should average slightly over 1 prize a month. They're rubbish if you put <£1000 in, might as well buy a lottery ticket, but as you approach the maximum you statistically win £25/month on average. Which is better than most savings accounts.

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That 1.0% figure is the one quoted on the NS&I rates page.  I would like to know more about the volatility in returns.  For example:  if someone were to invest £100,000 - then they'd expect £1000 return per year - but it would not be regular.  I'd like to know the distribution of sizes of payouts.  If  NS&I premium bonds paid a single saver £100m once every 3 years, that'd be a problem.  If the bulk of premium bond prizes were between £50 and £500, then - perhaps - that would not be.

Any idea where to get the breakdown?

The prize breakdown for September 2020 is shown on the MSE link below.

https://www.moneysavingexpert.com/savings/premium-bonds/

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I've seen it somewhere, but essentially there a small amount goes into the million pound prize, then the rest is split between the small and medium prizes.

Many thanks for the annecdotes... they are interesting.

One of my personality quirks is to want to check the details... so I'd still like to see this information about distribution of prizes from an official source.  I'd like to use some real numbers to provide probabilities of various returns each month.... as, with concrete numbers (that I believe to be accurate) I'd reassure myself that I'm not making a stupid error.

One thing that has always bugged me, however, is what might be the motivation for the government wishing to reward  those who are less risk adverse relative to those who are more risk adverse... with a product where the only sensible justification is risk adversion.

Edited by A.steve
Extra thought added
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Don't worry.

All the money the government saves on NS and I can be spent on the new more worthy furlough scheme.

I am a looney leftie and even I think this money being spread around like a farmer in a muck spreader is ridiculous. 80% with no commuting costs....beautiful. It’s winter soon so maybe we should add a few quid for heating, say make it 90%. 

No wonder everyone is buying houses....we are financial invincible. 

I don’t REALLY mean (or maybe I do)  this but a proper recession every 7/8 years did everyone the world of good. My first one was early 1990’s. It reset house prices too and if you are relatively frugal it’s used to be a great time to get a cheap house, cheap car and nudge up the career ladder whilst all the low performing staff moaned that lunch allowances had been cut whilst you knuckles down and moved into management. 

Cycles were hard but they were a blessing and a good reset. 

Caveat...if tomorrow the new scheme is very frugal and many workers will have too much hardship then I will completely about turn my view....I guess I could be a politician after all 😆

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  • @A.steve the link I posted a few posts up has the premium bond stats/calculators etc. that you are looking for.  Unless you genuinely want to work them out yourself.

  Many thanks - I'd overlooked that link...  I'd not be adverse to doing some calculations myself... (I might want some subtly different stats...) but the lazy pre-cooked calcuator is definitely very useful.

 

The prize breakdown for September 2020 is shown on the MSE link below.

https://www.moneysavingexpert.com/savings/premium-bonds/

That page is a great resource.  The only thing is that it leaves me feeling that there may be a bait and switch about to happen.  We know that the rate of return is going down from 1.4% to 1.0% - and I wonder if the distribution will also be adjusted.  I've this nagging feeling that someone might suggest that lots of people getting lots of small prizes will just be added to savings - while a small number of big prizes are more likely to be spent into the economy.

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16 hours ago, Pop321 said:

all I am saying is now rates are so low it is impossible to substitute with more savings and it is to encourage yield chasing

Cash in the bank isn't the only way of saving...pay down debt, take out less debt, buy cheaper brands, buy less luxury goods, rent rather than buy, cut back on nonessential services such as beauty, carpool etc etc.

All deflationary effects caused by low interest rates.

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Dear Rant,
 

From 12 October 2020, the interest rate on your Marcus account will be going down.We've added a document to your 'My documents' area to explain when the changes will come into effect and what your savings options are.

 
What's changing
 
Current underlying interest rate Underlying interest rate from 12 October 2020
1.05% AER* / 1.04% gross (variable) 0.70% AER* / 0.70% gross (variable)
 
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37 minutes ago, rantnrave said:
 
Dear Rant,
 

From 12 October 2020, the interest rate on your Marcus account will be going down.We've added a document to your 'My documents' area to explain when the changes will come into effect and what your savings options are.

 
What's changing
 
Current underlying interest rate Underlying interest rate from 12 October 2020
1.05% AER* / 1.04% gross (variable) 0.70% AER* / 0.70% gross (variable)
 

I just went to their website because 0.7% is 70 times greater than NS&I income bonds shall be, and I'm met with this:

 

 

Applications are currently closed

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Dear Rant,
 

From 12 October 2020, the interest rate on your Marcus account will be going down.We'veed a document to your 'My documents' area to explain when the changes will come into effect and what your savings options are.

 
What's changing
 
Current underlying interest rate Underlying interest rate from 12 October 2020
1.05% AER* / 1.04% gross (variable) 0.70% AER* / 0.70% gross (variable)
 

Nice spot.
I haven’t had a letter yet....maybe it’s just your account. 😆😆🤦🏻‍♂️

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I was expecting this - NS&I is usually quite slow to reprice and can sometimes be the best buy both in rates as well as security.

It is not just that this rate has been lowered, but the rate of others will be able to drop now - a lot of them, especially the fixed term deposit markets, will be able to drop their prices because they are no longer in competition with NS&I. Expect others to drop their prices. I wouldn't be surprised if the banks had been lobbying about how attractive the NS&I rate was compared to what they could offer.

I think the banks are reading my posts...

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I just went to their website because 0.7% is 70 times greater than NS&I income bonds shall be, and I'm met with this:

 

 

Applications are currently closed

Disappointed but not surprised by the Marcus cut. I think it will fall further quite soon.

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Dear Rant,
 

From 12 October 2020, the interest rate on your Marcus account will be going down.We'veed a document to your 'My documents' area to explain when the changes will come into effect and what your savings options are.

 
What's changing
 
Current underlying interest rate Underlying interest rate from 12 October 2020
1.05% AER* / 1.04% gross (variable) 0.70% AER* / 0.70% gross (variable)
 

Had that email this afternoon too. Obviously we need to go out and spend instead of saving, maybe even stick a few k on the credit card as well, just to be extra helpful.

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Dear Rant,
 

From 12 October 2020, the interest rate on your Marcus account will be going down.We've added a document to your 'My documents' area to explain when the changes will come into effect and what your savings options are.

 
What's changing
 
Current underlying interest rate Underlying interest rate from 12 October 2020
1.05% AER* / 1.04% gross (variable) 0.70% AER* / 0.70% gross (variable)
 

 

 

Nice spot.
I haven’t had a letter yet....maybe it’s just your account. 😆😆🤦🏻‍♂️

Thanks Mr Rant, they have sent one to me now....I am blaming you 😆😆

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  • 440 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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