Savers are being advised to shift their cash if they are facing a rate cut over the coming days.
Around two million savers with the Treasury-supported National Savings & Investments (NS&I) and the taxpayer-supported RBS Group will see the interest rates on their accounts cut in the near future.
Close to a million loyal savers with NS&I will see their rates cut as the provider brings old accounts – some dating back almost a century – in line with new return-calculating methods.
A number of old NS&I savers are able to transfer onto its current index-linked savings certificates, which return interest at the RPI measure of inflation plus 0.05%. But many now remain stuck with fixed-interest certificates paying a pitiful 0.09%.
While the best rates available on easy access accounts are far from spectacular, they offer much more than those that loyal savers have been left with from the Treasury-backed provider.
Over a million RBS / NatWest customers will also see returns on their tax-free ISA accounts slashed by up to 1% after the bank decided that the higher returns were “unsustainable in the current market”.
The bank is converting many of its old ISAs to the latest issue, which returns just 1% on balances between £1 and £24,999, and 1.5% on balances above £25,000.
As a result, some of the group’s three million existing ISA customers will receive an increase in their rates while others will see their rates cut by up to half.
RBS says that customers stand to benefit from the changes, with some high-value investors set to see their ISA rates treble from 0.5% to 1.5%.
However, savers with a better performing account such as the e-ISA (2.25%) will be disappointed when these rates fall into line with the new simplified accounts.
Switch to a Better Account?
Experts are now reminding consumers not to settle for second best as the cost of living continues to rise at an above-target level.
One of the problems is the lack of knowledge about transferring cash ISA balances. ISAs are deceptively versatile, and balances can be moved from bank to bank provided that the new account accepts inbound transfers.
Competitive tax-free accounts that allow inbound transfers include the one-year fixed rate ISA from Virgin Money (1.91%) and Aldermore Bank (1.85%).
The best easy-access ISAs currently available include the Kent Reliance 60-Day Notice ISA, which offers 1.80% on balances above £1,000, while a host of providers, including Virgin Money, Britannia, and the Mansfield and Teachers Building Societies, are offering 1.75% on instant access accounts.
So, it might be a good time to review your current rates and see if you can improve by switching your ISA nest egg to another provider.
(Want to know more about transferring your cash ISA? Find out here.)
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