Charity groups today condemned the decision by National Savings and Investments (NS&I) to scrap its savings account for non-profit organisations. The bank apologised for the “inconvenience” the move will cause hundreds of smaller charities.

The Treasurer's Account was launched in 1996 to offer an “absolutely secure” deposit option with ready access and a good rate of interest. But the scheme failed to compete with high street alternatives and has lost clients in recent years.

Ron Green, of the Charities Aid Foundation, which advises charities on finance, branded the closure "unfortunate" and said loss of choice in the sector could push some charities into non-specialist accounts, resulting in reduced income.

Meanwhile, Ernese Skinner, of the Charity Finance Directors Group, said the move would mean significant hassle for smaller clients who will have to shop around for alternatives, diverting resources from charitable activity.

But Anna Bowes, of AWD Chase de Vere, said the accounts should not be missed. “The top rate [of 4.65 per cent] is bad – well below the base rate.”

She said the closure could have a disruptive impact, but would have the positive longer-term effect of steering charities towards more competitve rates elsewhere.

NS&I will not advise account holders on where to move funds, but said that banks and building societies offer around 200 similar accounts, listed at moneyfacts.co.uk. Tables at the website show that organisations investing the average deposit of £65,000 could find favourable rates at a number of big-name alternatives.

For example, a charity investing between £50,000 and £100,000 can secure 5.20 per cent at Anglo-Irish Bank and 4.95 per cent at Alliance & Leicester Commercial for similar 30-day notice accounts, well above the 4.30 per cent offered by NS&I.

No new organisations will now be able to open the variable rate Treasurer accounts. From August 10, clients will no longer be able to make transactions, except to close them. Mark Brooks, of NS&I, said interest would continue to paid at “competitive” rates after that date.

The bank would not name clients, but said that around 600 of the 932 account holders were clubs and societies. The remainder include more mainstream charities, religious organisations and trades unions.

Total deposits of £61.3 million represent less than 0.1 per cent of funds invested in NS&I.