‘Loyal’ savers hit by rate cut

NS&I reduces interest on ISA product

A GOVERNMENT-backed bank has delivered more pain for hundreds of thousands of savers by slashing rates on one of its top-selling products.

National Savings & Investments yesterday confirmed it would reduce the interest on its Direct ISA from 1% to 0.75% from September 24.

It comes months after it cut the amount people could put into its popular Guaranteed Growth or Guaranteed Income Bonds from £1million to just £10,000.

Experts predict NS&I, which runs the Premium Bonds, could take an axe to other product rates.

It comes after the agency, which gets money for the Treasury, saw its fund-raising target reduced from £8billion to £6bn this financial year.

As of March, 387,000 people held a total of £4.6bn in Direct ISA accounts.

NS&I said one reason for the cut was that the Treasury could raise money for less elsewhere.

Jill Waters, NS&I retail director, said: “We have taken the decision to reduce the interest rate on our Direct ISA to deliver positive value for taxpayers.”

It comes as saving rates on bestbuy accounts are creeping up.

The Bank of England could announce a rate rise – from 0.5% to 0.75% – next month too. Susan Hannums, co-founder of advice site Savings Champion, said: “NS&I has wielded the axe on the rates on offer, which may not end here. “This at a time when rates for new savers from the rest of the market are on the up.” Sarah Coles, personal finance analyst at broker Hargreaves Lansdown, said: “This is a blow to loyal NS&I savers, but it had little choice in the matter. “It has to maintain a difficult balance between offering reasonable rates to savers – and not attracting so much cash that it overshoots its target.”