NS&I cuts cash Isa interest rate on its Direct IsaDirect Isa customers will now earn 2.25% AER

07 November 2012

NS&I logo

National Savings and Investments (NS&I) has reduced the interest rate on its Direct Isa by 0.25%, from 2.50% to 2.25% AER, meaning that more than 300,000 savers will see their return fall. 

NS&I's Direct Isa rate had been unchanged since 2009. Interest rates on other savings products from NS&I remain unchanged.

NS&I cash Isa rate reduction follows savings review

Cash Isas allow you to save up to £5,640 tax-free each year. NS&I explained that it took the decision to reduce the interest rate on its Direct ISA following its regular review of the savings market, which includes the interest rates payable on comparable products.

The interest rate cut follows the news in August that NS&I had exceeded its target for net financing by £18m in the 2011/12 tax year.

The best rate instant access cash Isa currently available is offered by the Post Office and pays 3.01% AER (including a 1.26% fixed bonus for the first 18 months).

Don’t settle for uncompetitive savings rates

NS&I products are perennial favourites among savers because the organisation is backed by the Treasury and can therefore guarantee 100% of deposits.

However, savings with other UK-licensed banks and buildings and societies are protected under the Financial Services Compensation Scheme (FSCS) up to a limit of £85,000 per individual per financial institution.

This means you can search for the best available interest rate on your savings, safe in the knowledge that your money would be protected if your account provider went bust, as long as you don't exceed the £85,000 limit in a single financial institution. Check you're getting the best deal on your savings with our unique savings booster tool.

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