NS&I cuts interest rate for thousands

• 14 September 2015
• From the section Business

More than 400,000 customers of government-backed National Savings will see their interest rates cut from mid-November.

National Savings & Investments (NS&I) will cut the rate on its tax-free ISA account by 0.25 of a percentage point to 1.25%.

The cut comes after NS&I found itself with bumper inflows of cash.

It is required under government rules to ensure that it does not stifle competition in the rest of the market.

NS&I’s Direct ISA, with market-leading returns, had been attracting upwards of £800m a year from savers desperate to find a reasonable return, while taking advantage of a 100% government guarantee.

Even more significant was the boost from the highly popular Pensioner Bonds and by the Premium Bond maximum limit going up to £50,000.

Jane Platt, chief executive of NS&I, said it was a “difficult decision” but the institution had to “strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector”.

The cut will apply to £3.8 billion of savings from 16 November.