Published On: Wed, Aug 19th, 2020

NS&I ISA: Interest rates rule differs to other cash ISA providers | Personal Finance | Finance

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Saving money is no doubt a priority for many, however research suggests not everyone is ensuring the cash they’ve worked hard to set aside actually works hard for them. The Moneyfacts UK Savings Trends Treasury Report data this week revealed coronavirus has seen UK savings rates halve.

The research found, for instance, easy access accounts have halved – from 0.56 percent in March to 0.22 percent this month.

Since March 2020, average savings rates for notice accounts and their ISA equivalents have halved too, as well as one-year fixed ISAs.

Furthermore, all average savings rates are at their lowest point since Moneyfacts’ electronic records began in 2007, the finance product data company said.

Seeking the market-leading interest rate in an account that’s right for them will be a priority for many.

READ MORE: Savings rates slashed – the implications for your money

For some, this may mean a fixed-term or easy access savings account, while an Individual Savings Account (ISA) may be of interest to those looking to save tax-free above the Personal Savings Allowance (PSA).

According to Moneyfacts, the best Instant Access ISA rates today stand at 0.90 percent AER – something which is offered by two providers – Synergy Bank and NS&I.

The latter offers the Direct ISA product.

This is a cash ISA – meaning it’s not suitable for those wanting to invest their full allowance in a stocks and shares ISA and/or an innovative finance ISA.

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Furthermore, while it’s possible to withdraw money online or by phone with no notice or penalty, it is not what is known as a flexible ISA.

As such, it means that all deposits within the tax year will count towards the annual allowance, regardless of whether withdrawals are made or not.

The minimum investment for this account is £1, while account holders can save the maximum of £20,000 in the tax year 2020 to 2021 – which is the annual allowance.

NS&I explains the interest is calculated daily, and paid yearly on April 6.

While the rate is currently 0.9 percent AER, it’s important to note this is variable.

Guidance on the NS&I website states that the “rate is variable so we can change it up or down from time to time, for example when the Bank of England base rate changes or when rates in the general savings market change.”

However, unlike other savings providers, NS&I has a rule which means savers must be given advance notice of any changes to the interest rates it offers.

“We’ll give advance notice of any rate changes by publishing adverts in a range of newspapers and by updating our website,” the savings provider explains.

“When the rate is going down, we’ll also contact you personally in advance to let you know.”

Who can open the NS&I Direct ISA?

This is a cash ISA for customers aged 16 or older, who are resident in th eUK for tax purposes.

It’s only possible to open an account in the individual’s own name.



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