Few tears for worn-out Post Office account

There will be little mourning over the death yesterday of a savings account first opened in the mid-19th century.

As post office counters wound down their weekend trade, National Savings & Investment (NS&I) closed its ordinary account for good.

The original Post Office savings account, it was set up in 1861 and left its 2.5 per cent interest deal unchanged until 1966, attracting millions of savers along the way; in 1971, the rate reached a high of 3.5 per cent.

However, in today's competitive market, its passing is no bad thing. At closure, NS&I's ordinary account rates were risibly low. Whether your balance was £500 or £5,000, the rate was no more than 0.95 per cent.

A staggering number of us - 12.8 million - have money in these defunct accounts, albeit in tiny sums: 11.5 million have less than £2 in them. However, about 500,000 accounts have an average of £850.

So what happens now? NS&I has written to customers, encouraging those with at least £100 to transfer their money into an Easy Access savings account. This operates via post offices but uses a cash card instead of a passbook. A transfer is done by filling in a form at your local post office or by telephoning NS&I on 08453 666667.

But before you do, look at the interest rates on offer. It pays 1.75 per cent on balances up to £999; 3.25 per cent between £1,000 and £4,999; 3.55 per cent between £5,000 and £9,999; and 4.3 per cent if you have over £50,000. Don't forget that you'll have to pay tax at 20 per cent too.

These rates are better than before but investors should consider other accounts first, says Susan Hannums of independent financial adviser Chase de Vere. "NS&I's rates have been uncompetitive for a long time now - shop around to see if you can earn more interest."

ING Direct offers one of the best standard rates available by telephone and web, with 4.75 per cent gross on a £1 investment. The best rival deals can't be accessed via a branch, which NS&I hopes will be in its favour

To access your money instead transferring it (and given that the minimum amount you can transfer is £100, most account holders won't qualify in the first place), visit the Post Office for a closure form or call the telephone number above.