The Direct Saver accounts from the Government run National Savings and Investments (NS&I), has cut its interest rates.
On January 25th the annual interest rate was reduced from 1.75% to 1.5% 
The NS&I admitted that the decision had been taken to make the popular savings account less desirable. The Government had set a target to collect £2 billion from savers, but it has surpassed that and raised £4.8 billion so far this financial year.
The Chief Executive of NS&I, Jane Platt, said that the move was necessary to slow down the influx of savers funds, she added that she expected the figure to have gone down to £4.5 billion by the end of the financial year.
She said: “Since November we have seen an increase in customer deposits,”
“This has been driven by a relatively small number of savers depositing large amounts of money, particularly into our Direct Saver account.
“We have also seen a decrease in the number of customers withdrawing their money from products across our range,” she added.
The recent problems with global finance markets have led to an increase of savers seeing the Direct Savers account as a safe haven for their money. Many customers had moved funds from other accounts into their NS&I account and had not taken out any existing savings it had in the Direct Saver accounts.
In March 2011, the Direct Saver had a total of 19,874 customers who had an average of £85,000 savings. This amounted to £1.7 billion. The sum has increased substantially, although NS&I would not state what the precise figure was.
The reduction in interest rate was well received by the Building Societies Associations (BSA).
The body have complained that the NS&I has an unfair advantage over building societies in attracting savers. This has led to a shortfall of funds that could be used to attract new mortgage customers.
Adrian Coles of the BSA, said: “It has been obvious that NS&I has been exceeding its target and would have to reduce its interest rates,”
“It has unique advantages because it can offer a 100% state-backed guarantee and building societies have been losing funds to NS&I.”
In September 2011, the NS&I closed its index-linked bond account to new customers. The account, which protected savers against rising inflation, had only been on offer for a few months but in that time half a million new accounts were opened.
The NS&I has also been reducing its portfolio of other accounts. In November the decision was made to cease selling its Investment accounts and Easy Access accounts.
The Investment account will be opened to new savers again in May but only by postal application. All existing Easy Access accounts will be shut down entirely this July.
The Government offers run by the NS&I will always prove popular as they are the only savings accounts that are guaranteed not to go bust.
