NS&I said customers would benefit from the higher interest paid on the Direct ISA – 2.25% compared to the 0.5% currently available on the Cash ISA. The change, which comes into effect from 25 May, also affects customers in its T Cash ISA (formerly TESSA-only ISA).

NS&I will be lowering the minimum investment amount for its Direct ISA from £100 to £1 from 6 April 2013, while cash investments into Premium Bonds over the Post Office counter will end from 1 April 2013. Savers can still invest in Premium Bonds by cheque and debit card at the Post Office or directly from NS&I by post, phone, online or standing order.

Jane Platt, chief executive of NS&I, said the organisation had been working to modernise its savings product range since 2007, and that these changes would reduce its cost to the taxpayer and deliver a 10% reduction in its budget in real terms by 2015 – a requirement set down in the 2010 Spending Review.