The eagerly awaited ISA allowance has been launched this week, allowing over 50 savers to shelter more of their savings from the taxman, but according to uSwitch.com, some providers have now cut their rates.

It appears Lloyds TSB has made the biggest cut, reducing the rate of its one year fixed rate ISA from three per cent to two per cent, while RBS have reduced its rates on a number of accounts by up to 0.25 per cent.

Norwich & Peterborough Building Society has also made cuts to its one year mini cash ISA, reducing the rate by 0.20 per cent, to 2.60 per cent.

Commenting on the decision taken by these providers to cut rates, Rumina Hassam, savings expert at uSwitch.com, said: “With 21 million over 50s eagerly awaiting the ISA limit increase it’s really disappointing to see providers have cut their rates in the recent weeks, despite the static base rate.”

Over 50s who take full advantage of the new ISA limit can now invest up to £10,200 in a stocks and shares ISA, while £5,100 can be put into a cash ISA.

According to uSwitch.com, an over 50 saver making full use of the new allowance on a cash ISA could earn up to £110 in interest in one year based upon an account paying four per cent in interest, compared to around £78 based upon the old limit.

However, Rumina Hassam is predicting more ‘rate trimming’ may occur in the coming months as a result of the new ISA allowance.

“For many providers, this is money they simply do not want to part with. In fact, by taking advantage of the new full allowance, the over 50s could save up to £105,000 each by the time they hit retirement with interest totalling almost £28,000. This could provide a reasonable lump sum towards a decent pension income without the added risk of the stock market.”  

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