Paste or rotate? NS&I raises Direct Isa rate for 333,000 customers – but savers find much better interest elsewhere
- Direct Isa increased from 2.15% to 2.4% today
- Approximately 333,000 NS&I customers benefit from this
- They can get up to 3.51% on easily accessible cash Isa rates elsewhere
National Savings and Investments today increased the interest on its Direct Isa savings account from 2.15 percent to 2.4 percent.
Approximately 333,000 NS&I Direct Isa customers benefit from the increase.
The easily accessible account can be started with £1, has no notice period or penalty when withdrawing funds, and all interest is earned tax-free.
Someone who has the maximum £20,000 Isa allowance in this account can now expect to earn £480 in interest over the course of a year.
Rate increase: NS&I has raised the rate on its Direct Saver Isa – but one expert has labeled it ‘underwhelming’
NS&I believes the new rate means the product is well priced compared to the rest of the Isa market.
According to Moneyfacts, the average low-threshold Isa rate is currently 2.29 percent.
The best easily accessible money ISAs are currently offered by Paragon, Shawbrook and Cynergy Bank. All three allow money transfers and come with Financial Services Compensation Scheme protection up to £85,000 per person.
Paragon Bank’s Triple Access Isa pays 3.51 percent. Customers are allowed to make a maximum of three withdrawals per year. If this limit is exceeded, the rate drops to 0.75 percent.
Shawbrook and Cynergy both offer simple, easy-to-access deals, such as NS&I’s Direct Saver.
Cynergy Bank pays 3.5 percent and Shawbrook Bank pays 3.45 percent.
The good news is that NS&I customers tired of average returns can switch their Isa to get a better deal.
You also do not need to contact NS&I, the new provider will request the money directly from her.
Those who switch need only open an Isa account with a new provider and let them know that they want to transfer an existing Isa account.
The new provider sends an Isa transfer form online or by post and after completing and returning the new provider completes the transfer.
The process takes no more than 15 days.
Anna Bowes, co-founder of Savings Champion says: ‘This is a disappointing rate increase by NS&I.
‘NS&I often don’t pay the best rates, but that’s because you benefit from the protection of all the money in the account – which can be up to £2 million in the Direct Saver.
‘But as you can’t transfer previous cash Isa’s to this account, you can only add £20,000 a year, meaning you might as well choose another cash Isa paying a much better rate with another provider.
‘Cynergy Bank currently pays 3.5 percent on its low-threshold Isa. At £20,000 that’s a difference from earning £700 a year or £480.
“With inflation still in double digits, every penny counts, so if you can find a better rate, switch.”