NS&I to transfer customers to better rate ISA
The move, which will happen 25 May, forms part of NS&I's decision to simplify and modernise its savings range and will see customers enjoy a rate which is 4.5 times better than the one they currently have.
The new minimum investment amount for the Direct ISA will also be lowered from £100 to £1.
In addition, from 1 April customers will no longer be allowed to make cash investments into premiums bonds over the Post Office counter. However, they will still be able to invest in premium bonds by cheque and debit card at the Post Office or directly from NS&I by post, phone, online or standing order.
Jane Platt, Chief Executive, NS&I, says: "Since 2007 we have been working to simplify and modernise our range of savings products and to encourage our customers to invest with us directly.
"From 25 May 2013, customers holding our Cash ISA will benefit from the much higher interest rate paid on our Direct ISA. There will be some changes for our customers who use the Post Office - however, staff in our UK based contact centres will be on hand to help with the transition."
A form of National Savings Certificate, premium bonds are effectively gilt-edged securities: you loan your money to the government and, in return, it pays you for the privilege with a guarantee it will return your capital at a specified date. Where premium bonds differ is that the interest payments (currently 1.5%) are pooled and paid out as prize money and you can get your cash back within a fortnight, with no risk. Launched by Chancellor of the Exchequer Harold Macmillan in his 1956 Budget, every single £1 unit has the same chance of winning and in May 2011, 1,772,482 winners (from a total draw of 42,539,589,993 eligible bond numbers) shared £53,174,500. The odds of winning are 24,000 to 1 and the maximum holding is £30,000 per person but it remains the only punt in which you can perpetually recycle your stake money.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.