On 16 November, National Savings & Investments announced that savers in its NS&I Direct Isa will see their interest rate drop from 1.5 per cent to 1.25 per cent.
Calum Bennie, communications manager for provider Scottish Friendly, said: “Given the Bank of England has recently indicated the outlook for interest rates remains stubbornly low, the NS&I rate cut is not unexpected, but will be disappointing for savers.
“It is yet another blow to cash Isas. This cut by a Treasury-led provider makes it likely that others will follow suit.”
He warned that savers should be set for at least a further year of low interest rates, with the likelihood of a rise in the bank base rate pushed further into 2016.
Mr Bennie added: “This is why more people are now dipping their toes into stocks and shares Isas as a way of saving for their future. Although risk is attached, savers should seriously consider stocks and shares Isas as a potentially higher return alternative to cash deposits.”
Justin Modray, founder of advice website Candid Money, said: “It is disappointing to see NS&I reduce the rate on its Direct Isa, but not surprising. The Bank of England base rate looks set to remain low for some time yet and, ignoring the loss-leading rates offered by banks on some accounts, this is firmly reflected by savings rates currently on offer.
“In spite of this cut, the NS&I Direct Isa has been one of the more consistent cash accounts out there and remains one I would consider.”