United Kingdom

NS&I now aims for £35bn of savers' cash this financial year

The Treasury is turning to Britain's army of savers in the wake of the coronavirus pandemic with a hugely revised financing target this year.

National Savings and Investments has raised the target, which runs from April 2020 to April 2021, a mammoth 483 per cent, from £6billion to £35billion.

It says the move has been made to 'reflect government finance requirements arising from Covid-19.'

Treasury piggy bank: NS&I has raised its net financing target today to a mammoth £35bn

Last month, NS&I – which has a number of savings products that have become default best buys and the ever-popular Premium Bonds – said the target would be revised, depending on the requirements.

Today, it has revealed that between April and June 2020, £14.5billion of net financing has poured into the Treasury-backed bank – or almost £5billion a month.

It showed that £19.9billion went into NS&I products in that period, and it means £193.7billion of savers' cash is now held there.

This compares to £169.6billion this time last year, a rise of 14 per cent in 12 months.

If it continued at this level, the target would be smashed before the end of the year, suggesting cuts could be on their way soon.

This is because of the rates continue to be top of the pile, it is likely savers will continue to shun other providers and choose NS&I, meaning more inflows than required.  

According to NS&I, it now has 25million customers and all capital offers 100 per cent security, as it is backed by the Treasury.

NS&I has also announced that its value indicator target had been suspended for a further three months, until the end of September.

This gives an indication of how cost-effective it is for raising finance for the Government, comparing the cost of net financing and servicing existing customers' deposits, with how much it would cost to raise funds through the wholesale market via equivalent gilts.

Smashed: Savings rates have plummeted in 2020 and it means NS&I now offers some of the best buy deals, by default

Why has it proven so popular?

Firstly, because NS&I is Treasury-backed, money is 100 per cent covered and in some cases, to the tune of £2million – far surpassing the typical £85,000 Financial Services Compensation Scheme limit offered by most banks and building societies.

In a time of crisis, many see NS&I as a safe port in a storm.

Secondly, its Premium Bond products continue to be incredibly popular, offering two prizes a month of £1million and allowing savers to put in up to £50,000 in.

The rate on this was meant to be cut earlier in the year, and the number of prizes, but NS&I suspended this because of the pandemic.

Lastly, a number of its savings deals have simply rocketed to the top of savings tables, as others challenger banks and building societies cut rates, largely thanks to two Bank of England base rate cuts.

For example, in our independent This is Money easy-access savings tables, two products offer more than 1 per cent – and both are from NS&I.

These are its Income Bonds with a 1.15 per cent rate and its Direct Saver offering 1 per cent.

Meanwhile, even its tax-free deal now leads the pack – its Direct Isa pays 0.9 per cent, as other savings rates crumbled around them.

For many, it means NS&I has become the go-to spot to earn the best interest in the traditional savings market. 

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