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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.

  • SB says:
    2 Nov2 November 19:27

    I have around 50k Avios and am on track to reach get the Companion voucher threshold later this month. Is it worth me keeping my Avios or transferring them?

    • Nigel Keya says:
      2 Nov2 November 19:39

      You’ve got enough for some European RFS tickets – so IMV, keep the points, you could save them for later. They’re worth a lot in redemptions. Esp 2-4-1. It’s hard enough to get the points in the first place, so in your position I wouldn’t give the Avios up lightly.

      • Tom says:
        2 Nov2 November 23:39

        But as per the article, you could always transfer them back from Nectar to Avios at the 0.8p rate, if you did want to use them as Avios after all.

        If you keep them as Avios and end up not wanting to use them, you’re stuck with the new lower value.

  • ilou says:
    2 Nov2 November 19:49

    Why is everyone talking like it’s the end of the world !!!

    We have seen devaluation (earning avios and floor for redemption) before and there are always new opportunities to earn avios !

    I actually think now is the best time to use avios.. business class fares are skyrocketing, $ is very high.. I’ve never had a better value on my redemption per point spent across BA and Marriott

    • Scott says:
      2 Nov2 November 20:08

      Only great value if you would have paid those skyrocketing cash fares. I suspect many folk here wouldn’t, even baulking at the ridiculously high surcharges on reward bookings, hence the transfers to Nectar.

      • BJ says:
        3 Nov3 November 05:58

        I agree with @ilou. The notion that the value is dependent on whether one would pay the alternate cash fare surfaces time and again and it is simply weird. It relates to efforts to value loyalty points and taking decisions driven by perceived value. Personally I think that’s all wrong, I think decisions on loyalty points are best driven by need and desire not by perceived value. If you want to go some place and you have the points or points plus cash but not the cash only then it’s the right redemption for you, any attempt to constrain it in terms of notional values are just a waste of time and unnecessary about. It can also promote hoarding at the expense if the more sensible earning abd burning, resulting in issues such as we see now with the dilemma on transfers to Nectar.

        • Lady London says:
          3 Nov3 November 09:34

          You’re kind of right BA – it’s about being able to travel Business class or First when you wouldn’t be able to or if you simply wouldn’t pay to. Also to give an option to travel last minute or at peak time which otherwise would be out of reach or you’d decline to reach in light of the cost.

          But valuing rationally puts a floor and a ceiling on what you’re spending which helps you understand your own decisionmaking. Fine to identify a ‘black box’ of value that you can’t really get inside of unemotionally to see what’s in it – but knowing that black box is aboit 60% of your reason for doing it and the range of its value, is useful.

          Just like hotel points, if the earning and spending base is fixed and known and always fixed to a mathematical proportion of spend for both earning and spending then that breaks a huge chunk of thr emotional feedback loop of saving and spending with them – it’s just a fixed rebate so much less exciting and motivational than an aspirational redemption.

          I’m not telling you something you don’t know but you didn’t say it.

          • Lady London says:
            3 Nov3 November 09:35

            *BJ, not BA

          • BJ says:
            3 Nov3 November 13:01

            @LadyLeeds, I get the benefits in relation to benchmarking and comparisons and I’m not against using them, I just think the proper perspective is much more nuanced as some others would appear to agree based on the comments below. Also, where rational values are brought into play I often consider them inappropriate anyway as they rarely reflect the nature of the flexible flights avios gets us. Still, at the end of the day what an avios point is worth remains a very personal thing and it is up to each of us to try our best to get it right for ourselves. Sure, Nectar helps with a floor but even there, that floor looks a bit shaky when considering the alternatives to using Nectar points in Argos etc.

    • Blair Waldorf Salad says:
      2 Nov2 November 20:28

      It’s not better value if you’d never realistically pay the Avios + fees price for your journey if it was cash, even if it is a saving on current mad cash prices. Thankfully ex-EU still offers some value, even to East Asia.

      • KevinS says:
        2 Nov2 November 20:37

        “It’s not better value if you’d never realistically pay the Avios + fees price for your journey if it was cash, even if it is a saving on current mad cash prices. ”

        Depends.

        If you’d pay economy and that costs eg £1000 then £850ish plus a few hundred quid of avios is decent value.

        Obvs that depends on there being availability to somewhere you actually want to go

        • Anouj Rajput says:
          2 Nov2 November 20:46

          But if I was ever to spend that much on economy, I’d much rather spend it on Virgin, Qatar etc. Not on terrible BA. So for people like me the value is moot

      • optomdad says:
        2 Nov2 November 20:37

        Yes, but it is better value if the avios you have + taxes you pay make what would be a completely unaffordable flight actually affordable.

      • steve says:
        2 Nov2 November 20:45

        241 to Maldives keeps me interested in Avios. £14k cash otherwise.

        • TGLoyalty says:
          2 Nov2 November 22:39

          £14k for 2?

          Qatar £4k each tomorrow with a far superior product or combo of Austrian/Swiss for £2.2k leaving tomorrow.

          Book in a few weeks BA is £3.3k.

          Be happy you got your flights but Don’t kid yourself on their value.

          • BJ says:
            3 Nov3 November 05:38

            Qatar in early November from EDI-BKK was £12k ow in J. I checked Skyscanner a week ago for returns from BKK-EDI Nov/Dec should I need to return home. Few options available on random dates I picked. Cheapest Y fare was about £1300 on TK.

    • Harry T says:
      2 Nov2 November 20:49

      I don’t think you understand what the word devaluation means. It’s not reassuring if you find new ways to earn Avios but they have been devalued.

      And don’t get into the habit of comparing cash rates you wouldn’t pay Vs Avios + taxes and charges that you can tolerate. That doesn’t mean you are getting sky high value per Avios, if you wouldn’t pay the cash alternative. This is just a fake people play to make themselves feel good. True value is determined by what you would actually pay.

      • ilou says:
        2 Nov2 November 20:57

        Yes, avios value going down but I can earn much and quite easily today .. 100k from Barclays and Amex business bonus is the highest it’s been so all in maybe I am still getting the same value

        You will have to pay cash prices if you want to travel with BA or others and don’t have any avios… I save 1000s just on economy using gold priority (despite now the frustrating 1£ rule !!!) when compared to easyJet /Ryanair for Europe travel in peak season

      • Erico1875 says:
        3 Nov3 November 06:56

        Getting so called fake value is exactly the reason I collect Avios.
        In April I treated the wife and daughter to CW EDI to NYC.
        125K Avios, a 2 41 and £1300 fees.
        Cash fares were around ,for 2, £1000 economy and £6000 Business Class.
        No way would I pay that and tbh doing the trip in CW made for a much better experience .
        Looking ahead, Ryanair base fares to the Costas next summer are upwards of £200 from EDI. Add on seat selection, luggage etc and we are almost at £300 pp.
        So there is still plenty value to extract from Avios

  • ilou says:
    2 Nov2 November 20:58

    Anyway, If more people are cutting ties with BA avios then it’s great news for those staying! 🙂

    • optomdad says:
      2 Nov2 November 21:08

      Agreed, but they won’t be cutting ties. Despite all their bluff and bluster, the same people complaining today will be collecting avios tomorrow and not Lufty Points or Air France points. Because despite all the complaints Avios (despite the devaluations) still give the best value both for earning and spending. Anyone who thinks other airlines don’t devalue their points at the same or worse rate than IAG is, to be honest, delusion

    • Mikeact says:
      3 Nov3 November 10:42

      +1

  • lifelessordinary.xyz says:
    2 Nov2 November 21:57

    I’ll buy 27000 avios off a Gold for £230 Cash after the 16th and again on Jan 1st. (Jokes!! 😉

  • Nigel Keya says:
    2 Nov2 November 22:23

    My 3 kids have got about 25K Avios each – I might just open a few more Nectar a/cs tomorrow and transfer across while it’s 0.8p 🙂

    I know you can have a household Nectar a/c – no idea if offspring are allowed in – currently just myself and the wife.

  • babyg says:
    2 Nov2 November 23:18

    this Avios > Nectar thing didn’t exist 2 years ago.. and people are acting like this is the end….

    • Charles Martel says:
      3 Nov3 November 08:31

      Two years ago, the taxes and charges were less ridiculous and with each stealth devaluation having alternate uses for Avios becomes more valuable. Devaluing an alternate use devalues the programme.

      Membership Rewards points were always more valuable due to their additional flexibility, but having a “use anywhere” Barclaycard in my wallet and accruing just Avios was easier than carrying an Amex + a MC/Visa card. These changes mean I’m back to Amex with a marginally fatter wallet. It’s not the end of the world but it’s *another* devaluation of the Avios programme which leaves a bitter taste in the mouth and tarnishes the Avios/BA brands.

      Earn and burn as the wiser heads would say.

  • Sam says:
    3 Nov3 November 00:02

    With international travel opening up thankfully I can use my avios on frights again as if the conversion to nectar did not exist.

  • Matthew says:
    3 Nov3 November 00:51

    Is the 50,000 Avios cap to Nectar per calendar month or every 30 days? Thanks.

    • Lady London says:
      3 Nov3 November 00:55

      calendar.
      some might set up the regular monthly 25,000 or so auto-move at a timing carefully chosen so it repeats on auto basis, then do a manual mo e of 50k quickly after setting up the auto?

    • Rob says:
      3 Nov3 November 00:56

      Calendar

    • Matthew says:
      3 Nov3 November 00:59

      Thank you both. Did a transfer on 31 Oct and it won’t let me do one today. Perhaps I have to wait til they’ve posted to nectar.

      • Nigel Keya says:
        3 Nov3 November 06:27

        Worth trying again, on a different browser. I/we successfully transferred (ie 50000 x4) on both 31/10 and 01/11 but switched browsers to achieve my wife’s second conversion. My second one went through fine (same browser) but my wife got the red message until she changed browser.

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