The government has been accused once again of abandoning savers who are unable to keep up with the rising cost of living.
The Treasury-supported savings institution last week announced a 30 basis-point increase to the returns on its income bonds, from 1.45% to 1.75%. But this still falls woefully short of the consumer prices index measure of inflation, which currently stands at 2.8%.
The popular NS&I received praise earlier this year after it pledged to automatically transfer a series of old and low-performing ISAs into a new ‘Direct ISA’ account offering 2.25% (read more). It has become the norm in recent years for returns on savings accounts to plummet after an introductory period, with most banks happy to let savings deposits flounder.
The raise from 0.50% to 2.25% positions the NS&I Direct ISA as the fourth strongest in the market for instant-access ISA accounts, after First Direct (3.00%), the Coventry Building Society (2.60%), and the Cheshire Building Society (2.30%).
The government is accused of letting down savers by refusing to match inflation through its NS&I savings facility.
But there are still droves of discontented savers who believe that NS&I should be providing better conditions for savers given the severe impact on savings accounts caused by the government’s Funding for Lending Scheme.
Inflated-linked certificates, which provide some measure of guarantee against the rising cost of living, will not be sold for at least another year.
And the plea from many quarters to allow savers to save their entire annual tax-free allowance in cash also fell on dear ears, with only a small increase announced in last month’s budget.
Last month, Nationwide CEO Graham Beale said that government could have improved the inflationary problem for savers through an increase to the cash ISA limit (read more).
"It will not only help savers address the inflationary pressures, but also help borrowers struggling to raise a deposit," he said.
Keith McDonald
Which4U Editor
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