London, Jan 28, 2026, 08:15 (GMT)
- Starting Feb. 12, NS&I will reduce the Direct Saver rate to 3.05% and Income Bonds to 3.01% gross (3.05% AER).
- The government-backed saver explained the change mirrors trends across the broader savings market
- Analysts warn the cuts might push up pressure on Premium Bonds’ prize rate eventually, even though no changes were announced yet
Britain’s state-owned National Savings and Investments (NS&I) announced it will slash interest rates on its Direct Saver and Income Bonds accounts starting Feb. 12, denting returns on two of its key easy-access products.
The adjustment follows a broader dip in UK savings rates after the Bank of England lowered the Bank Rate to 3.75% last December, a change now filtering into returns for savers.
Focus has shifted again to Premium Bonds, which pay out through a monthly prize draw instead of interest. NS&I’s latest Premium Bonds prize fund rate stands at 3.60%, with odds of 22,000 to 1 for each £1 bond number. All winnings are tax-free.
Direct Saver’s rate is set to fall from 3.30% to 3.05% gross/AER. Income Bonds will take a bigger hit, dropping to 3.01% gross and 3.05% AER from 3.26% gross and 3.30% AER. For clarity, AER stands for annual equivalent rate, a standard metric to compare savings rates.
Andrew Westhead, retail director at NS&I, said: “We keep all our savings rates under review as market conditions change.” He added the adjustments would support meeting its net financing target. nsandi-adviser.com
Net financing represents NS&I’s calculation of its net funds change after factoring in inflows, withdrawals, interest payments, and Premium Bonds prizes. This figure directly affects how much money NS&I channels to the government. The UK’s 2025-26 Budget set a net financing target of £13 billion for NS&I, allowing a margin of plus or minus £4 billion.
Beyond NS&I, the top easy-access rates remain firmly over 3%. Chase, supported by JPMorgan, is offering a 4.5% AER variable rate on its boosted saver, which includes a fixed 12-month boost.
Sarah Coles, head of personal finance at Hargreaves Lansdown, warned NS&I customers to brace for a “significant disappointment” as easy-access rates fall. She also cautioned that “Premium Bonds could be next for the chop” if rate cuts spread further across the market. GB News
NS&I has traditionally emphasized safety, given its backing by HM Treasury. However, that advantage has shrunk for many savers since the FSCS raised the deposit protection limit to £120,000 per eligible person, per authorised firm, effective Dec. 1, 2025.
Matt McKenna, a personal finance expert at comparison site Finder, told MoneyWeek: “These cuts aren’t a surprise,” highlighting the broader drop in savings rates following December’s cut to the base rate. MoneyWeek
The path for Premium Bonds remains uncertain. The prize fund rate fluctuates, and NS&I hasn’t signaled any adjustments yet; holders face the risk that lower market rates could drag prize rates down, and the “return” hinges entirely on luck—sometimes coming up empty in a given month.
Premium Bonds provide tax-free prizes ranging from £25 to £1 million in their monthly draw. Customers can hold a maximum of £50,000, according to NS&I.
