National Savings & Investments this week announced that it plans to cut the rate on its Direct ISA from 1% to 0.75% from 24th September. The popular cash ISA is available from just £1 and has no restriction on withdrawals.
Although the move is bitterly disappointing, this is not wholly unexpected.
NS&I’s net financing target (the net amount that NS&I needs to raise each year) for the current tax year is at its lowest level for some time, standing at just £6bn.
This compares with to £13bn for the year 2017-18, which was then revised down to £8bn in the Autumn Budget in November 2017.
It’s easy then to see that reducing its rates could be on cards in an attempt to stem the inflow of cash.
This is hot on the heels of its announcement last month that new savers would be able to deposit just £10,000 each into the NS&I Guaranteed Income and Growth Bonds, reduced from £1m!
Now NS&I has wielded the axe on the rate paid on its cash ISA and it may not end here.
It’s a particular blow at time when rates for new savers from the rest of the market are on the up and in fact many best buy rates are at a two year high.
That and an expected base rate rise around the corner means this may be the move that pushes savers away from NS&I and towards those providers that clearly want their money and are willing to pay better rates for it.
The good news is that far better rates on easy access ISAs can be found today, so you needn’t put up with seeing rates cut at a time when rates across the rest of the savings market are on the increase.
More than half (57%) of all easy access cash ISAs currently available are paying more than 0.75% gross/AER and the very best rate, from Al Rayan Bank, is 1.35% gross/AER. So, there is no need to put up with such an uncompetitive rate on your valuable tax-free savings.
- Take a look at our variable rate cash ISA best buy table which includes several easy access options.
With the introduction of the Personal Savings Allowance (PSA) many savers have been shunning cash ISAs, however, as interest rates continue to increase the longer-term benefits of holding money in a cash ISA are clear.
For more information on this read our simple factsheet about the Personal Savings Allowance.
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