More than 333,000 NS&I customers are set to benefit from the increase.

The savings organisation last increased the rate on its Direct ISA in January this year – while the rate on its Direct Saver and Income Bonds rose in February too.

NS&I said: “The change made to NS&I’s Direct ISA will ensure that the product is priced appropriately when compared to the rest of the ISA market.”

However, the most competitive cash ISA on the market - without withdrawal restrictions - currently pays considerably more at 3.5%, pointed out Sarah Coles, head of personal finance at Hargreaves Lansdown.

She said: “The NS&I easy access cash ISA is playing catch-up, but it’s still trailing well behind the market. The rate is an improvement, and it’s well ahead of the high street giants, but at 2.4% it’s nothing to get excited about.

“It’s not only lagging the most competitive deals by a significant margin, it’s also well behind the 2.85% on offer on its other easy access products.”

She added: “NS&I doesn’t want to set a blistering pace way out in front of the rest of the pack. It wants to be tucked somewhere in the middle, so it balances the needs of savers and taxpayers.”

NS&I said: “The change will help ensure that NS&I continues to balance the interests of savers, taxpayers and the broader financial services sector.”

NS&I’s Direct ISA allows customers to invest from £1 and up to £20,000 in the 2023-24 tax-year.

NS&I variable rate savings products

Source: NS&I