National Savings & Investments (NS&I) is cutting the interest that it pays to new investors in many of its fixed-rate products by up to three quarters of a point from today.

The move has been triggered by a fall in the yields on Government bonds, or gilts, which play a key part in determining NS&I's fixed rates.

Among those worst-hit will be savers in the new 31st issue of Children's Bonus Bonds, where the annual interest rate over the five-year life of the bonds will fall by 0.75 percentage points to 3.7 per cent. Their tax-free status means that the equivalent rate for basic rate taxpayers is 4.63 per cent and 6.17 per cent for higher rate taxpayers.

Other new issues being introduced today that will suffer a three-quarter-point cut compared with previous issues are the latest three-year and five-year Guaranteed Income Bonds, where the rate is reduced to 3.9 per cent, and the three and five-year Guaranteed Growth Bonds, where the rate falls to 4 per cent.

The one-year Guaranteed Growth and Guaranteed Income Bonds suffer a slightly smaller cut, of 0.55 points, bringing the new rates to 4.2 per cent and 4.1 per cent respectively.

Some purchasers of the new issues of savings certificates will also suffer a cut in interest compared with previous issues. The rate cut, of 0.55 points, will apply to two-year Fixed Interest Savings Certificates (44th issue) and five-year Fixed Interest Savings Certificates (93rd issue), meaning that the rate on the two new issues comes down to 2.95 per cent.

Their tax-free status pushes the equivalent rate for basic rate taxpayers to 3.69 per cent, or 4.92 per cent for higher rate taxpayers. Existing savers will not be affected by any of these changes, but NS&I's range now looks less competitive, with the best rival fixed-rate accounts paying more than 7 per cent, when NS&I is paying about 4 per cent.

Rachel Thrussell, head of savings at Moneyfacts, the financial research group, said: “It's disappointing that NS&I has lowered its rates by such a large amount, but it has always priced itself in a different way from other financial groups because it takes much more notice of gilt yields. Right now this is driving its rates down and making it less competitive.”

There will be no change to yields on products such as index-linked savings certificates, or index-linked gilts, which are dependent on the rate of inflation. Nor will there be alterations to NS&I's variable rate accounts, where the interest rate reflects movements in the Bank of England base rate.