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Avios to Nectar conversion rate devalued! What should you do?

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In a ‘surprising but perhaps not surprising’ move, British Airways has announced a devaluation of the ‘Avios to Nectar’ exchange rate.

This is NOT a two way devaluation. The ratio from Nectar TO Avios is not changing.

What this means is that you can no longer move Avios back and forth between the two schemes without any cost. You will now suffer a loss if you do so.

Avios to Nectar conversion rate devalued

What is changing?

Emails announcing this change seem to be going out today. It is not yet reflected at ba.com.

At present, 250 Avios converts into 400 Nectar points.

Since a Nectar point has a fixed redemption value of 0.5p, it meant that there was a floor value on the value of your Avios. 250 Avios got you 400 Nectar points worth £2, so 0.8p per Avios.

If British Airways or partner flight redemptions started to look like bad value, it didn’t matter. You could move your Avios to Nectar and guarantee yourself 0.8p. To be honest, you would struggle to get 0.8p of value on many flight redemptions, especially in long haul Economy, and I know that for many HfP readers transfers to Nectar had become very attractive.

After all, you could arguably use your Avios for Nectar points to pay for your weekly Sainsbury’s shopping and put the cash you saved into a holiday fund to buy flights for cash …..

From 16th November, the transfer rate moves to 300 Avios = 400 Nectar points.

To save you getting your calculator out, the floor value of an Avios now drops to 0.67p as 300 Avios = £2 of Nectar points.

Bizarrely, the rate is unchanged in the other direction

The rate when you transfer Nectar points TO Avios remains at 400 Nectar points = 250 Avios.

This means that you can no longer move your Avios backwards and forwards without penalty. You will effectively be losing a percentage if you reverse a transaction.

Why has this happened?

It doesn’t take a genius to point the finger of blame at IAG Loyalty / Avios. There are two issues, I think.

The first is that, clearly, when you transfer Avios into Nectar points, IAG Loyalty has to pay real cash out to Sainsbury’s, which owns Nectar.

Because some IAG partners are paying close to 0.8p for their Avios, and presuming that IAG pays Nectar the full face value, IAG isn’t making any money on many Avios partner transactions.

This wouldn’t be a problem if people were choosing to spend their Avios on flights. However, it is becoming increasingly clear to many people – especially with British Airways increasing surcharges on Avios long-haul business class flights to almost £1,000 – that this isn’t something they want to do. Cashing out to Nectar made sense.

It is also logical that, with the economy taking a turn for the worse, saving some cash by converting Avios to Nectar to pay for your weekly shopping makes sense. It is a lot better for your budget than paying out almost £2,000 in taxes and charge for two ‘free’ business class flights to North America.

(The collapse of the £ won’t have helped either. It is now shockingly expensive to take a holiday anywhere where the currency is pegged to the US$, and many people will be rethinking their travel plans in the light of this. Paying £400 for a meal for six people, two of which were children, in a very average Mexican restaurant in Dubai last week came as a bit of shock to me, I promise you.)

The other issue is that the 0.8p transfer rate meant that British Airways had to remain ‘honest’. There was a limit to how much it could tinker with Avios because any negative changes would lead to a dash to the (Nectar) exit.

This 2nd factor is still true, of course, but to a lesser extent. Moving from 0.8p to 0.67p of Nectar points per Avios gives BA a little more wiggle room to leg you over, but not much.

It would be fascinating to know what Sainsbury’s makes of this. It will now see a lot less money coming in, as people decide not to convert to Nectar, but will still be paying IAG when people convert into Avios.

What should you do?

There is a very simple piece of advice here.

If you have 50,000 Avios in your British Airways Executive Club account, you should move them to Nectar before 16th November.

There is NO downside to doing this, only upside.

50,000 Avios is the monthly transfer cap, by the way, if you were wondering why I settled on that figure.

Look at this logically.

Today, 50,000 Avios gets you 80,000 Nectar points, worth £400.

After 16th November, 50,000 Avios will only get you 66,666 Nectar points, worth £333.

If you can’t find a good use for the Nectar points, you can still swap them back after 16th November with no loss. Because the incoming rate remains at 400 Nectar points = 250 Avios, you can swap them back into 50,000 Avios and you’re quits.

You have locked in a minimum 0.8p valuation for those 50,000 Avios. It will give you some protection if anything is coming down the line after 16th November to explain WHY IAG decided that 0.8p was now looking too generous …..

Conclusion

The two-way simplicity of Avios to Nectar transfers was the real charm of the scheme. The two schemes could operate symbiotically as one.

This is no longer the case. You will only transfer to Nectar if you knew that you had a firm plan to spend them, since transferring back to Avios would see you incurring a loss.

Most importantly, the floor value of 0.8p per Avios has been stripped away. There was, of course, no floor value at all prior to January 2021 when the Nectar partnership launched, so the fact that there is still a floor value – albeit a lower one of 0.67p per Avios – is still an improvement on the pre-pandemic situation.

If you believe that this move heralds some major upcoming changes to airline redemptions, I recommend moving 50,000 Avios into Nectar at some point in the next 14 days to lock in a guaranteed minimum of 0.8p of value.

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Category

British Airways and Avios, Sainsbury's and Nectar

Comments (360)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • BJ says:
    2 Nov2 November 15:29

    Knee-jerk reactions rarely pay off so it is time for cool heads and considered decisions, not panic. For example, we might
    not have read the reward trip report to Dubai today had Rob not kept his Virgin miles when almost everybody pushed the panic button and transferred to Hilton. There remains huge value in avios despite the current issues. I’m down to my last 350k again which is approximately the minimum amount I like to try and sustain so I doubt I’ll be making any more transfers to Nectar, been there, done that. Besides Nectar points might not be worth 0.5p next month.

    • Nigel Keya says:
      2 Nov2 November 15:34

      Champagne guy x about 40 cases: where are you – with the photo?

      Wish I’d done that/ my wife would have disowned me lol

    • ken says:
      2 Nov2 November 17:15

      I’d be surprised if they changed nectar points to be worth less than 0.5p

      I wouldn’t be at all surprised if the transfer rate nectar to avios became worse (in fact I’d put money on it over the next 6 months).

      Say 400 nectar – 200 Avios.

      After all, this is £2 = £2 (if we value Avios at 1p).

      Personally I don’t believe the ability to get Avios from Nectar drives that much footfall into Sainsburys

      • BJ says:
        3 Nov3 November 05:24

        Me too but stranger things have happened. They don’t need to reduce it, tvey get same end result just by chipping or slashing away at earnings, as they have done with the financial products.

    • Peter K says:
      2 Nov2 November 19:30

      A nectar points being worth 0.5p naturally devalues over time with inflation. They really have no need to devalue it further.

      An avios being 1/100000 of a flight to New York increases in value over time as the cash cost of the flight increases. That’s why they feel free need to devalue them.

  • G says:
    2 Nov2 November 15:47

    125k coming from Barclays in a few months have already lost ~£170

    • Ryan says:
      2 Nov2 November 21:21

      I’m in the same boat (plane?) as you, but still extremely good value for holding a couple of accounts open until February

  • namster says:
    2 Nov2 November 15:54

    I have over 200k avios can I move all over at the current rate ?

  • Nigel Keya says:
    2 Nov2 November 15:56

    ooh- er – you lost 16%

    You are the king of what’s worth it and what’s not lol

  • Anouj Rajput says:
    2 Nov2 November 16:20

    I keep getting “your date of birth does not appear to be saved against your British Airways Executive Club account.”

  • Jai says:
    2 Nov2 November 16:36

    Long time lurker and first time poster here:
    HfP (rightfully) got me to get the Amex gold card (I was going to spend the money anyways) and I now sit on 52k Amex MR points (baby steps). As someone who certainly does not spend more than I absolutely need to (i.e. never fly first/business) and is unfamiliar of ‘hacks’ to get the most of my points (I cannot even fathom the Middle East post that was just put up). Just to clarify, I am not ‘cheap’, I just don’t feel the need for luxury in my life (I still run a 4 year old flagship phone as I got a good deal 3 years ago).

    My absolute expenses coming up include a mobile phone + laptop (~12 months away) and several EU-based holidays (nothing booked, but hoping for 2 separate trips next spring/summer – 4 tickets as I hope to treat my S/O)

    Is it worth me converting MR > Avios > Nectar ASAP (I get £67 more now than later) to benefit from Argos/Ebay; OR would you advise me to hang fire and keep it as MR to use with airlines for my trips to Europe (all in economy); Not committed to BA/Avios.

    • Nigel Keya says:
      2 Nov2 November 18:21

      Not really: you still get great value out of European redemptions on BA, could be 7500 Avios + change on peak flights, even (ie peak) when flights are going for £200+.

      Keep your Avios as Avios, would be my advice if you have a tidy sum like 52K, enough for some European flights.

      • Jai says:
        2 Nov2 November 20:05

        Thanks for your feedback/comments. Really helping me find the guide rails here.
        To be clear, I have it all as Amex MR right now, and I have a 0 Avios balance. I do have £100 worth of Nectar points, but that is as I shop mostly at Sainsbury’s.

        At the time of my upcoming holidays, I would like to opt for the cheapest (non-budget-airline) flight that I can get, so I have no real loyalty to Avios or any other airline.

        Given the above, would you still recommend holding onto it as MR points or moving it to Nectar ASAP to get the most value of of them. Both the travel (Amex/Avios) AND the purchases (eBay/Argos) will eventually happen for sure, it’s just trying to decide what would work best for my future self lol.

        • YC says:
          2 Nov2 November 22:34

          Why not tentatively book in advance now for your two trips next year with avios? £35/person cancellation fee. Availability will get more difficult the later you book. Generally I don’t find much value in transferring MR to other airlines for European trips.

          • Jai says:
            3 Nov3 November 11:31

            Sadly, we do not know where we are going nor when. I’m based out of Dubai, so atleast one trip will be to Dubai, but there will also be atleast 1 more EU trip (hopefully 2).
            Re your last statement of transferring MR to other airlines, do you mean relative to Avios (so Avios give the best ‘bang per MR point’ of all partners?) OR in general, like MR have uses elsewhere that I can get more value out of them?

            Thanks for your patience with my noob-ness.

        • Lady London says:
          2 Nov2 November 22:51

          MR points can be moved to lots of different programs. Strongly suggest you only move them when you’re ready to spend them, hold as MR till then. They are far more valuable than almost all other points due to this flexibility.

          If BA messes with more stuff and you lose an opportunity, well they would have done that anyway. If you were in avios by then well you’d have nowhere to go. Unless you had already booked and flown and not needed to change of course. If you are still in MR you still have choices.

          • Jai says:
            3 Nov3 November 11:34

            Yes, with the ‘floor’ of 0.8p, I was well pleased with it and kept it as MR as I have no upcoming expenses.
            Ofc, this ‘devalue’ throws a spanner in the works for sure, as I stand to get £70 less of ‘value’ for my next purchase for the same number of points which is why I am having this dilema, all my accounts are already linked so I just need to hit the button if the need be.
            I will take your advise on holding it as MR for now as I too, appreciate the flexibility, but let’s hope I don’t regret this decision lol.

  • G says:
    2 Nov2 November 17:00

    Two devaluations announced in two days.

    What next? Perhaps a 25% reduction in tier points accrual for non flexi fares (something to this effect is in the works).

    • Jack says:
      2 Nov2 November 17:24

      According to who ? Nowhere has it been said or rumoured teir points will change which is based on distance and cabin they cannot easily change . Ultimately if you are flying you should earn the teir points relevant to that nothing less

  • jj says:
    2 Nov2 November 17:12

    I very consistently get more than 1p value per Avios, and availability is pretty good on the routes I want to use. Whilst a devaluation is always a possibility, things would have to get a lot worse before I would prefer Nectar points.

    • Nigel Keya says:
      2 Nov2 November 18:45

      Sure – can’t argue with that – same here – but a lot of us have all the Avios we need for (in my case, European) flights for the foreseeable future. So we have excess Avios that can be used for real cashflow savings – not Sainsburys/ Argos – BUT – Ebay! @0.8p = 1 Avios.

      I wouldn’t – like you, it seems – give up the Avios I need for flights in the next few years. It’s the ones on top I’d rather turn into cashflow.

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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