The interest rate offered on the NS&I direct Isa is to fall from 1 per cent to 0.75 per cent on 24 September, the firm has said.
NS&I said the move was prompted by a need to consider what’s best for savers and taxpayers, as well as the greater good of the financial services sector.
The 25 basis points fall will leave the direct Isa trailing even further behind current best cash Isas, which include the 1.35 per cent easy access cash Isa from Al Rayan Bank and Virgin Money’s double take cash E-Isa Issue 1, which pays 1.30 per cent.
Jill Waters, retail director at NS&I, said: “We have taken the decision to reduce the interest rate on our direct Isa to deliver positive value for taxpayers.
"As part of our operating framework, we must ensure that we continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector."
She said the Isa continued to gives savers the opportunity to earn a fair rate and benefit from tax-free interest, while deposits into all NS&I products were "100 per cent secure", as the firm is backed by HM Treasury.
Jon Bean, chartered financial planner at Eldon Chartered Financial Planning, said: “Such a small change in interest rates is not earth shattering, but it is as good a reason as any to encourage clients to review their savings.
“The personal savings allowance has left the tax wrapper less relevant, but there are good homes for cash, be it other savings accounts or, if NS&I is a big draw, the premium bonds and guaranteed income bonds.”
NS&I is to contact direct ISA customers at least two months in advance of the rate change, it said.