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Move goes against grain

Blow to savers as NS&I cuts ISA interest rate

SavingsSavers struggling to find a decent return on their savings in deposit accounts suffered another blow when National Savings & Investments cut the interest rate on its cash Isa.

The Treasury-controlled group, with some 400,000 savers, has cut the rate by 0.25% to 1.25%, effective from 16 November.

It means it has fallen from an interest rate of 5.3% when it launched the product in April 2008. The last cut was in February.

The move goes agains the grain with most banks and building societies recently raising rates in an attempt to lure savers back into the market.

With inflation barely above zero current rates are at least showing some growth, albeit marginally.

NS&I said it sets its interest rates to balance the interests of its savers, taxpayers and the stability of the broader financial services sector. It said it has taken the decision to reduce the interest rate on Direct ISA following its regular review of the savings market, which includes the interest rates payable on products comparable to Direct ISA.

Jane Platt, chief executive, said: “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.

“To ensure that 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% security on all their deposits.”

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