100,000 earn interest hike from National Savings & Investments

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More than 95,000 savers with more than £453 million in old cash Isas with National Savings & Investments (NS&I) will see their rate jump by 1.75 percentage points.

The Government-sponsored institution will move everyone from its old Cash Isa and T-Isa accounts, which pay 0.5 per cent, into its newer Direct Isa at 2.25 per cent. The switch takes place on May 25.

The transfer means £180 more tax-free interest a year for those with the average £10,366 balance in the T-Isa (the old Tessa-Only Isa, which launched more than ten years ago).

The average £4,732 in the old Cash Isa, closed to new savers since 2009, gains £83 a year.

Direct Isa, which you run over the telephone or internet, is among the top-paying easy-access Isa accounts available. From April 6, the minimum investment will fall from £1,000 to £1.

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In further changes from NS&I, you won’t be able to pay cash for Premium Bonds in the Post Office from April 1 — you’ll have to pay by cheque or debit card. Premium Bonds are also available directly from NS&I.

As a trade-off for the higher rate on Isas, you won’t be able to take money out of your Cash Isa or T-Isa over the counter in the Post Office. NS&I says only 2,000 such withdrawals have been made in the past five years.

Savers in these old accounts need do nothing. NS&I will write to them before the transfer takes place.

Savers who have cash Isas with other banks or building societies cannot transfer them into a Direct Isa.