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NS&I reduces interest rate on direct ISA

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
15/09/2015

National Savings & Investments (NS&I) is to cut the interest rate on its easy-access Direct ISA by 0.25 per cent to 1.25 per cent as of 16 November 2015.

The government-backed savings bank said it took the decision to reduce the rate following a recent review of the savings market.

“Interest rates in the easy access ISA market have been in decline over the year and our Direct ISA rate has stood out at the top of the best buy tables for some time,” said Jane Platt, NS&I chief executive.

“To ensure we continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector, we have taken the difficult decision to reduce the rate on our Direct ISA. However customers continue to benefit from a competitive rate, and 100 per cent security on all their deposits.”

NS&I will notify customers affected by the interest rate reduction at least sixty days in advance of it taking place.

Calum Bennie, savings expert at Scottish Friendly, branded the rate cut “a bitter blow for savers” which showed “none is immune” from rate cuts on cash ISAs.

“Over the past year we have seen several providers lower their interest rates, some to less than 0.5 per cent and now the Treasury-backed provider and a bastion of the savings market has followed suit,” he said.

“It would be premature to think that better news is on the horizon though. While the base rate may rise within the next few months, even if it does savers are likely to have a long time to wait before providers start to raise cash ISA rates. In the meantime, people should consider moving money they have languishing in cash ISAs into stocks and shares ISAs. Although more risky, stocks and shares ISAs offer long-term growth potential and some offer guarantees for the more risk-averse investor.”

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