Savings account Guides

National Savings & Investments

Updated: Wednesday 15th June 2011

National Savings & Investments (NS&I) is one of the UK’s largest savings institutions, but why is it so popular?

More than 26 million people save with National Savings & Investments. There are a variety of products available, from short term savings to long term investments - and you can choose your own level of risk, from guaranteed returns to the chance of winning a cash prize each month.

In this guide we will look at the pros and cons of the products available and investigate whether NS&I really is the best place for your money.

What is National Savings & Investments?

Originally called the Post Office Savings Bank, NS&I was set up by the government in 1861. The scheme serves two purposes:

1. To encourage ordinary wage earners to save for the future and to help them build up their savings securely
2. To provide cost-effective financing for the Treasury. The money paid in by the public provides a fund which the government borrows from for public spending.

Basically, by saving with NS&I you are lending money to the government and, in return, you are guaranteed that your investment is secure. Anyone can save with NS&I, but there are certain criteria for specific products.

You can apply for NS&I products at a Post Office branch, by post, by phone or online through the National Savings & Investments website.

How are NS&I products different from standard savings accounts?

Standard savings accounts are held with banks and building societies which are private organisations. When you save your money with them, it is usually reinvested to generate profit which is then shared between the organisation’s shareholders or members of the building society.

When you save with NS&I, your money is used to finance government spending and is, in effect, a cheap way for the government to borrow money from its citizens.

You will still receive interest on your savings but, unlike standard savings and investments, all money invested in NS&I is completely “capital protected”, which means you can rest assured that you will receive all your original investment back.

Advantages

• Unique - NS&I offers a range of savings and investments - some of which, like savings certificates and premium bonds, are not available from other institutions
• Tax-free - Many of the products offered by NS&I are completely tax-free, which means you won’t have to pay any tax on the interest or cash prizes that you receive
• Secure - Your money is completely secure because the government guarantees to repay it.

Disadvantages

• Interest rates - NS&I does not offer the most competitive interest rates on the market and, if you save with NS&I, you may have to trade a high interest rate for peace of mind. However, be aware that the rates are generally better than they first appear because, for many of the products, you do not have to pay tax on any interest you earn.

What does NS&I offer?

NS&I are currently offering a wide range of products, including “easy-access” savings that let you take your money out whenever you want to and longer term investment schemes, where you must leave your money in place for one to five years.

Some of NS&I’s products are tax-free. This mean you do not have to pay income tax or capital gains tax on any interest or prizes you receive. These products include ISAs, premium bonds, savings certificates and children’s bonus bonds.

Other products are taxable, which means you must pay interest in full and declare them on your tax return. These include savings accounts, income bonds, guaranteed income bonds, guaranteed growth bonds and guaranteed equity bonds.

Should I save with NS&I?

NS&I is the most secure place to save and invest your money. Because it is backed by the Treasury, it really can guarantee that you get your money back no matter what happens. So, if you are fraught with anxiety about the safety of your cash, then NS&I might be for you.

However it must be stressed here that if you save with another bank or building society you are in fact completely covered by the Financial Services Compensation Scheme to £85,000. This means that if your bank or building society does go bust, you will still get all your money back.

Read more about keeping your cash safe here