National Savings & Investments, the government-backed savings scheme, has cut the rates on its savings accounts as savers flock to it for security.
As one of the few UK savings accounts
providers to offer a 100 per cent guarantee on deposits, NS&I has been accused by some as profiteering from the credit crisis.
Like the other providers that can offer a safe haven for savers' money because of a Government guarantee, such as the nationalised banks Northern Rock and Bradford & Bingley, NS&I savings accounts and ISAs
s have seen an influx of deposits since the beginning of the banking crisis.
Even though cutting interest rates will make the accounts less attractive, it is thought that the guarantee holds more sway than potential returns with savers, during current economic conditions as banks collapse and people fear for their money.
"There is an element of profiteering there," said Andrew Hagger from comparison website Moneynet.co.uk of NS&I's rate cut, "but I do not think it will stop savers putting their money there. People are more intent on finding a safe haven than finding the best rate."
In a statement, NS&I has admitted that it has seen an increase in deposits, but added that the decision to cut rates on some of its savings range by up to 0.20 per cent was necessary in order to maintain a consistent level of its market share.
The NS&I rate cut comes shortly after Northern Rock withdrew much of its savings accounts range; as a nationalised bank, it also boasts a 100 per cent of its savings guaranteed by the Government, unlike other banks which can only offer a £50,000 guarantee, and recent instability meant throngs of savers were flocking to make their money secure.
Northern Rock had to stop offering most of its savings accounts to new customers in order to stay within the agreement of its nationalisation, which dictates that it must not take more than 1.5 per cent of the market share. While Northern Rock cannot be seen to have an unfair advantage over its competitors, NS&I uses its Government guarantee as a selling point.
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