NS&I set to slash rates what are the best alternatives? | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 18/11/2020

National Savings & Investments (NS&I) is set to reduce the rates on its Direct Saver, Investment Account, Income Bonds, Direct ISA and Junior ISA on Tuesday 24 November, giving savers less than a week to switch to a higher-paying alternative.

The new rates, some of which are falling to just 0.01%, will push the accounts to the lower end of the savings charts, a significant fall from earlier in the year when NS&I’s Income Bonds topped the easy access savings chart.

Although savers often remain loyal to NS&I, especially as the accounts are 100% backed by HM Treasury, with rates seeing a significant fall, savers should consider switching accounts to get a better return on their savings. All the savings accounts featured in the Moneyfacts.co.uk charts are part of the Financial Services Compensation Scheme (FSCS)*, which means that deposits of up to £85,000 are protected in accordance to the scheme conditions, but savers should be aware that unlike NS&I accounts, non-ISA savings accounts are not tax-free. To find out if your savings are taxable, read our guide How are my savings taxed?.

To help savers find the best alternative NS&I account, we’ve looked at the highest-paying accounts in the easy access, easy access ISA and Junior ISA charts.

The best easy access savings option

NS&I’s Income Bonds held the top spot in the easy access savings chart throughout most of 2020, but from Tuesday its rate will fall to just 0.01% AER. Meanwhile, its highly competitive Direct Saver rate will be cut to just 0.15%.

Three accounts currently pay the top rate of 0.75% AER in the easy access chart. Gatehouse Bank pays an expected profit rate of 0.75% on anniversary on its Easy Access Account, but this account has a higher opening deposit requirement of £1,000, which is significantly higher than that needed to open an NS&I account. This account allows unlimited further additions and withdrawals can be made via a nominated account. It must be opened and managed online.

ICICI Bank UK pays 0.75% monthly on its SuperSaver Savings Account, which requires a minimum deposit of just £1 to open, but this account is only available to new and existing HomeVantage Current Account customers. It allows unlimited further additions and withdrawals but only via a linked ICICI Bank current account. It can be opened online, in branch, or by phone and then managed online, in branch, by post and via mobile app.

West Brom Building Society also pays 0.75% AER yearly, which includes a 0.15% bonus until 28.02.2022, on its WeBSave Bonus Saver (Issue 5), but again this account requires a £1,000 minimum deposit to open. It allows unlimited further additions and withdrawals can be made at any time. It can only be opened and managed online.

Savers looking for the best easy access rate with a minimum opening deposit of less than £1,000 should consider SAGA’s Saga Easy Access Savings Account, which pays 0.70% AER monthly, including a 0.15% bonus for 12 months. This account requires a minimum deposit of just £1 to open. It allows unlimited further additions and withdrawals. The account must be opened online but can then be managed online and by phone. This account is operated by Goldman Sachs International Bank.

Al Rayan Bank also pays an expected profit rate of 0.70% AER monthly on its Everyday Saver (Issue 2), which requires a £500 minimum deposit to open. Unlimited further additions and withdrawals are allowed. It can be both opened and managed online, in branch, by post, by phone and via mobile app.

The best easy access ISA option

NS&I is set to cut its Direct ISA from its current top rate of 0.90% AER to 0.10% on Tuesday. Savers looking for an easy access ISA alternative will find that Paragon Bank currently offers the highest rate of 0.65% AER paid on anniversary or monthly on its Triple Access ISA (issue 2). A minimum deposit of £1 is needed to open this ISA. It allows further additions via a nominated account, but restricts withdrawals to three during a 12-month period. If more than three withdrawals are made during the period, a lower interest rate of 0.25% is paid. Transfers in are accepted. This ISA must be opened and managed online.

Six providers have the second-best rate of 0.60% AER on accounts without opening restrictions. Al Rayan Bank pays an expected profit rate of 0.60% AER monthly on its Instant Access Cash ISA (Issue 2), which requires a £50 minimum deposit to open. This ISA allows further additions and withdrawals. Transfers in are accepted. It can be both opened and managed online, in branch, by post, by phone and via mobile app.

Bath Building Society pays 0.60% AER yearly on its Instant ISA. A £1 minimum deposit is needed to open this ISA, which allows further additions and withdrawals. It accepts transfers in. The ISA can be both opened and managed in branch and by post.

A higher deposit of £1,000 is needed to open Gatehouse Bank’s Easy Access Cash ISA, which pays an expected profit rate of 0.60% AER on anniversary. Further additions and withdrawals are allowed and it accepts transfers in. This ISA can only be opened and managed online.

To get Kent Reliance’s rate of 0.60% AER yearly or monthly on its Cash ISA - Easy Access - Issue 24, savers must deposit a minimum of £1,000. A lower deposit of £1 can open this ISA, but it will only pay 0.10% AER yearly on deposits less than £1,000. Further additions are allowed and withdrawals can be made but the withdrawal method is dependent on how the ISA is opened. Transfers in are accepted but requests must be made within 30 days of account opening. It can be opened online, in branch or by post and then managed online, in branch, by post and by phone.

Scottish Building Society pays 0.60% AER yearly on its Loyalty Cash ISA, which requires a £1 minimum deposit to open. Further additions and withdrawals are allowed. Transfers in are accepted. It can be both opened and managed in branch and by post.

Skipton Building Society pays 0.60% AER on anniversary, which includes a 0.20% bonus for 12 months on its Cash ISA Saver Plus Issue 1. To open this ISA, a £1 minimum deposit is needed. It permits further additions, as long as the money is new to the institution, and withdrawals are allowed. External transfers in are accepted. This ISA can be both opened and managed in branch, by post and by phone.

The best Junior ISA option

The NS&I Junior ISA rate will be cut from 3.25% AER to 1.50% AER on Tuesday, resulting in its falling from its top position within the Junior ISA (JISA) chart to the middle of the table. As a result, those savings towards their child’s future may want to consider an alternative higher-paying option.
Coventry Building Society offers a rate of 2.95% AER paid yearly on its Junior Cash ISA (1). A minimum deposit of £1 is needed to open this JISA, which allows further additions. Withdrawals are not permitted. It accepts transfers in and can be both opened and managed in branch, by post and by phone.

The next-best rate comes from Tesco Bank, which pays 2.75% AER on anniversary on its Junior Cash ISA. A £1 minimum deposit is needed to open this JISA. It allows further additions but does not permit withdrawals. Transfers in are accepted. This JISA can be opened online or by phone and then managed online, by phone and via mobile app.

 

*This excludes several offshore accounts.

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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