By 
Customers of National Savings & Investments (NS&I) will find the value of their savings start to lag further behind other options from tomorrow.
This is because the state-backed bank will not pass on the full 0.25pc rise in base rate unveiled by the Bank of England in August.
The interest rate on the NS&I’s Direct Isa will actually drop tomorrow from 1pc to 0.75pc.
Then from October 1 the interest rate payable on NS&I’s Income Bonds will rise from 1pc to 1.15pc.
Savers with an Investment Account will see their interest rate increase from 0.7pc to 0.8pc, while the Direct Saver’s rate will rise from 0.95pc to 1pc.
So what are the alternatives that pay the most interest?
Direct Isa
This can be taken out with £1 and can be managed online and by telephone. Cash can be withdrawn with no penalties, and the Isa has no fixed term.
The closest alternative with the highest rate is from Al Rayan Bank, according to Moneyfacts.
This has an Isa paying 1.36pc interest that can be managed by telephone and online, though savers need at least £50 to open it.
Income Bond
If you are thinking of taking out an NS&I Income Bond, there are other options available that will pay far more.
The NS&I bonds have no fixed term and pay interest monthly, and savers have to have at least £500 to open one.
But if you had £500 to invest and were tempted by bonds, Masthaven have an 18-month option that pays 2.05pc. If you have at least £1,000 to invest, Charter Savings Bank offer an 18-month bond paying 2.11pc.
Both will expire and require the customer to renew or shop around again, unlike the NS&I option which will carry on indefinitely, but the extra interest is considerable.
Investment Account
The NS&I Investment Account is aimed at those who want to manage their savings by post. There is no online or branch option.
Savers can access their cash with no notice and pay no penalties.
The highest-paying alternative is offered by Yorkshire Building Society, which has an easy access savings account paying 1.41pc that can be managed by post or in branch.
Direct Saver
The NS&I Direct Saver is an easy access savings account that can be managed online or over the telephone.
The alternative paying the most is sold by Sainsbury’s Bank. The firm has a similar easy access account paying 1.35pc interest that can be managed by telephone and online.
However, the Sainsbury’s option requires £1,000 to open, while the NS&I needs just £1.
If you want to invest less than £1,000 and want online and telephone access, Ford Money pays 1.29pc interest and lets you open an account with £1.
Other considerations
However, many savers like NS&I because it is backed by the state and therefore very secure. Many see this security as far more important than rate.
NS&I also has no upper limit on how much of your money it will repay should the worst happen.
Choosing other banking options means a limit of £85,000 will be protected by the Financial Services Compensation Scheme.
A spokesman for NS&I said: “NS&I is tasked to raise cost-effective and sustainable financing for the Government and we set our interest rates to balance the needs of our savers, taxpayers and the stability of the broader financial services sector.
"We believe that our interest rates are fair and that we offer a range of products to suit savers’ needs.”
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