FTAdviser.com

Advertising

ISA

NS&I

Type: Direct Isa

Description: NS&I has decreased the interest rate paid on its Direct Isa from 5.3 per cent a year to 4.8 per cent a year following the Bank of England's base rate cut by 0.5 of a percentage point.

Conditions: Investments can be made online, by telephone or debit card only. The minimum deposit is £1000 and the minimum further deposit is £250 or £100 by standing order. Investment of up to £3600 is permitted in the current tax year. The minimum withdrawal amount is £250 to a nominated bank account. Transfers from open to new customers; transfers from existing NS&I cash Isa opened by 5 April 2006 are allowed but no transfers from other providers.

Verdict: Any cut in savings rates is bad news for savers. Depositors looking to earn a reasonable return over a year may be better off putting their money in fixed-rate bonds paying higher returns, even though Isas offer the advantage of tax-free returns. With the latest consumer price index at 5.2 per cent, this Isa currently pays negative real returns. The 0.3 of a percentage point margin over the Bank of England's base rate is rather miniscule and not terribly attractive.

Contact: www.nsandi.com

Rating: one star out of five