National Savings and Investments has boosted the interest rate on its Direct Isa savings account today from 2.15 per cent to 2.4 per cent.
Around 333,000 NS&I Direct Isa customers will benefit from the rise.
The easy-access account can be started with £1, has no notice period or penalty when withdrawing funds, with all interest earned tax-free.
Someone holding the maximum Isa allowance of £20,000 in this account can now expect to earn £480 in interest over the course of a year.
Rate boost: NS&I has upped the interest on its Direct Saver Isa – but one expert has labelled it ‘underwhelming’
NS&I believes the new rate means that the product is priced appropriately when compared to the rest of the Isa market.
The average easy-access Isa rate is currently 2.29 per cent, according to Moneyfacts.
The best buy easy-access cash Isas are currently offered by Paragon, Shawbrook and Cynergy Bank. All three allow for transfers in and come with Financial Services Compensation Scheme protection up to £85,000 per person.
Paragon Bank’s Triple Access Isa pays 3.51 per cent. Customers are permitted up to three withdrawals each year. Exceeding this limit will see the rate drop to 0.75 per cent.
Shawbrook and Cynergy are both offering straightforward easy-access deals like NS&I’s Direct Saver.
Cynergy Bank pays 3.5 per cent and Shawbrook Bank pays 3.45 per cent.
The good news is that NS&I customers, fed up with average returns can transfer their Isa to secure a better deal.
There’s no need to contact NS&I either, as the new provider will request the money from it directly.
Those switching just need to open an Isa account with a new provider and let it know they want to transfer an existing Isa into it.
The new provider will send an Isa transfer form, either online or by post, and once completed and returned, the new provider will then complete the transfer.
The process should take no more than 15 days.
Anna Bowes, co-founder of Savings Champion says: ‘This is an underwhelming rate increase by NS&I.
‘Often NS&I does not pay the best rates but that that is because you have the benefit of the protection of all the funds in the account – which can be up to £2million in the Direct Saver.
‘But as you can’t transfer previous cash Isas into this account, you can only add £20,000 per annum, which means that you might as well choose a different cash Isa paying a far better rate with another providers.
‘At the moment Cynergy Bank is paying 3.5 per cent on its easy-access Isa. On £20,000 that’s a difference of earning £700 a year or £480.
‘With inflation still in double figures, every penny counts, so if you can find a better rate, switch.’
