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Rate cut leaves NS&I ISA savers looking elsewhere

Rate cut leaves NS&I ISA savers looking elsewhere

Category: Savings

Updated: 27/12/2013
First Published: 27/12/2013

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Hundreds of thousands of savers with a National Savings & Investments (NS&I) Direct ISA might be wise to move their money elsewhere after it was confirmed the rate paid on the tax-free account is to reduce in the New Year.

More than 310,000 savers will see the return on their Direct ISA drop from 1.75% to 1.50% from 27 February next year.

With the rate already having been cut in September from 2.25% to 1.75%, this latest news is another bitter blow for savers.

Despite the availability of better rates elsewhere, a considerable number of NS&I savers will almost certainly remain unmoved, content that a state-backed scheme effectively means 100% security for their deposits.

Ironically, the huge amount of money this security attracts has played a part in driving the rates lower, with NS&I obliged to temper their product offerings so that other savings providers can compete.

If you are an ISA saver with NS&I, the important thing to remember is that you are free to transfer the ISA elsewhere to secure a better rate.

You must, however, follow the correct procedure, and make any transfer direct between two providers.

ISAs cannot be transferred by closing an account and opening a new one with the money that has been withdrawn – all this serves to do is count towards the ISA allowance for the current tax year.

Your first step should be to contact the bank or building society that you want to transfer your ISA to and let them lead the process.


What next?

Find a cash ISA

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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