The Post Office Financial Services has introduced the Post Office Cash ISA, a new cash individual savings account paying a rate of 6.25%.

The company claims that new Post Office Cash ISA (individual savings account) is suited to the needs of savers looking for a competitive return on their savings and who want to take advantage of their annual tax-free allowance. The new ISA reportedly guarantees to track changes in the Bank of England base rate until January 1, 2010 and the rate will never be more than 1% below base rate, meaning investors who stay with the Post Office over the long-term will not be penalized.

For those who would like to invest money in a stocks and shares ISA, the Post Office is also offering the Post Office Investment ISA, which invests customers’ money in the FI Post Office Cautious Managed Investment Fund. The fund aims to provide medium to long-term capital growth by investing in a range of Norwich Union funds.

Richard Norman, director of savings at Post Office, said: Our new Cash ISA offers customers the opportunity to save in a tax efficient way whilst getting a very competitive rate of return. We hope that the launch of the cash ISA will benefit both new and existing customers who want a safe place to put their savings.