From 24th September, National Savings and Investments (NS&I) is cutting the interest rate on its Direct Savings Account (ISA) from 1.00% to 0.75%.
Figures from March 2018 suggest around 387,000 people held Direct ISA accounts, holding a total of £4.6 billion. NS&I claimed the decision to cut the rate was made in order “to deliver positive value for taxpayers”.
This follows the reduction in the interest rate on Guaranteed Growth and Income Bonds made by NS&I in March this year, after the new product proved too popular since its launch in December 2017.
Jill Waters, NS&I retail director, said: “As part of our operating framework, we must ensure that we continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.”
Government rules mean that NS&I is not allowed to attract too much cash, in fairness to taxpayers and so as not to destabilise the savings market.
The Direct ISA was first introduced in April 2008 with an attractive interest rate of 5.3%, but the rate has been dramatically reduced since then. Returns on ISAs in general have declined sharply during the past decade of low interest rates, discouraging many from putting money away.