Press Release

NATIONAL SAVINGS AND INVESTMENTS RATE CHANGES

24 January 2007

National Savings and Investments (NS&I) is increasing the interest rates by up to 0.45% on a wide range of its variable and fixed rate savings offers.  This increase follows the movement in the Bank of England base rate on 11 January 2007 from 5.00% to 5.25% and some increases in the gilt markets.

The revised interest rates on these fixed and variable rate products, including Income Bonds and Easy Access Savings Account, will come into effect on 24 January 2007, with the exception of the Direct ISA which was raised on 11 January 2007, and Premium Bonds which will take effect from 1 February 2007.

Premium Bonds

The Premium Bond prize fund rate will increase from 3.40% p.a. to 3.60% p.a. free of UK Income Tax and Capital Gains Tax.

The odds of winning a prize will stay at 24,000 to 1, meaning that someone with the maximum investment in Premium Bonds of £30,000 could, with average luck, win 15 tax-free prizes a year.   The prize fund rate split will change with 10% of the prize fund distributed in high value prizes (£5,000 - £1million), 10% in medium value prizes (£500 - £1,000) and 80% in lower value prizes (£50 - £100).

The Effect of Changes in the Premium Bond Prize Fund Rate

	JANUARY 2007 3.40% prize fund rate	FEBRUARY 2007 (estimate) 3.60% prize fund rate
Value	£97.74 million	£101.76 million
Total number of Prizes	1.43 million	1.41 million
Prize band split	7%-6%-87%	10%-10%-80%

The prize fund rate for the special Premium Bonds prize draw for June 2007 when NS&I will pay out five jackpot prizes of £5 million each will be 3.75% per annum tax-free1 (assuming no further changes between now and the end of May 2007).

NS&I's interest rates: key facts

• When interest rates are set on tax-free1 products, NS&I takes into account the amount of tax the Exchequer would have received if the product had been taxable
• NS&I's accessibility is not limited by geography or location, as the same rates are available throughout the UK and to non UK resident customers
• NS&I's fixed rate products are on sale every day throughout the year (although NS&I's Guaranteed Equity Bond is on sale in tranches during the year)
• NS&I prices its products to give fair, consistent and value for money returns
• NS&I does not try to buy market share, saving the need for customers to spend time shopping around for short-term headline rates. 

John Prout, NS&I sales director said: "The increase in the Bank of England base rate, coupled with recent rises in the money markets, means that many savings rates are also rising, which is great news for people with money to save or invest."