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 that came out alongside the Autumn 2024 Budget revised the 2024/25 gap – officially called the Central Government Net Cash Requirement – to £165.1 billion. Another £139.9 billion is needed to repay existing government debt which matures in 2024/25, bringing the total to over £300 billion.
In other words, the entire stock of NS&I, accumulated over 163 years, would cover the equivalent of about nine months of government financing. Viewed in terms of how much fresh cash NS&I is currently raising, its impact can be counted in days, not months. In the first six months of 2024/25, NS&I’s net inflow was £3.3 billion – four days’ worth 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 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 worth checking whether they still are the right home for your cash.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.
Content correct at the time of writing.