NS&I makes easy access ISA increase – How does it compare?

Despite the rise there are several other providers with better rates.

The Government-backed National Savings & Investments (NS&I) increased its Direct ISA rate to 2.40% AER today. This will be passed on to more than 333,000 account holders.

Having previously stood at 2.15% AER, the latest increase means its rate now betters the average easy access ISA rate on the market.

But the appeal of saving with the NS&I is perhaps in the security of the institution rather than its rates.

All your savings with the NS&I are protected by the Treasury, negating the need for the £85,000 protection from the Financial Services Compensation Scheme (FSCS).

Although you can only deposit up to £20,000 into this account per tax year, if you have other savings with the NS&I this will also be backed by the Treasury.

Despite this security and the recent increase, its rate remains some distance behind some of the best easy access ISA rates on the market.

Currently, Paragon Bank offers the market-leading easy access ISA rate of 3.51% AER, with Cynergy Bank offering the next best rate of 3.50% AER.

According to Moneyfactscompare.co.uk calculations, £1,000 with Paragon Bank would earn £35.10 a year in interest if the rate doesn’t change.

In comparison, the same deposit with the Direct ISA would only earn £24 over the same period.

You can use our calculator below to find out how much you would earn in interest on either of these accounts if you made a monthly contribution to your funds.

While easy access accounts tend to pay more interest than their easy access ISA counterparts, any returns you generate could be liable for income tax.

This all depends on your personal savings allowance, which you can read in more detail in our guide.