Your Isa still pays interest, but it’s less than 1/2p

Mrs B.C. writes: I have just received my NatWest cash Isa statement for the past year. Although it holds only a small amount, I was expecting some interest. To my disgust, there was none. I rang and was told that if the Isa is not used during the year, it is ‘blocked’ or ‘deactivated’. I wonder how many people have savings in these accounts and believe they are earning interest?

THE advice you were given on the phone was wrong. Isa deposits carry on earning interest for as long as you leave the money with the bank. You do not have to add more each year.

So why did your Isa earn nothing? Well, your account holds only £6. Interest is added each month to this particular Isa, but with so little in it, and with interest rates so low, your £6 earned less than half a penny.

If it had reached even half a penny, then NatWest’s policy is to round it up, but below half a penny interest is treated as zero.

That said, the bank never explained this properly and made things even more confusing by mistakenly saying in a letter that an Isa needs a credit at least once a year. I asked staff at NatWest’s head office to look into this and they spotted the mistake right away.

They told me: ‘We have arranged for Mrs C to come into her local branch so we can talk through her finances and make sure she is making the most of her money. We are also going to give her a £50 cash credit.’ Excellent.