Investors in NS&I's index-linked savings certificates who renew into a new term will see returns linked to the lower Consumer Prices Index (CPI) and not the Retail Prices Index (RPI) from May 2019.
RPI is the higher measure of inflation with CPI typically hovering around 0.8 percentage points lower due to differences in the way that the two measures are calculated.
John Glen, economic secretary to the Treasury, said the decision was taken to switch to the lower CPI measure because it was necessary balance NS&I’s obligation to savers with the needs of the taxpayer.
He said: "We know that savers who hold these products really value the inflation protection they give. The transition to CPI for new investments over the next five years retains this, while balancing the needs of the taxpayer."
NS&I confirmed on Friday the change would apply to all certificates maturing on and after 1 May 2019 where customers renew into a new certificate.
Ian Ackerley, chief executive of NS&I, said index-linked savings certificates were inflation beating and tax-free.
He added: "Savers will still have the peace of mind that their money is protected. Index-linked savings certificates holders will continue to benefit from a unique and attractive product, which remains an important part of our product range."
Paul Gibson, chartered financial planner and managing director of Granite Financial Planning, said: "The move to CPI from RPI is not a surprise as it is the government's preferred measure of inflation.
"It will lead to lower rates for investors as CPI normally lags RPI but it will save National Savings lots of money which is the reason for implementing the change."
