"Wealth is not his that has it, but his that enjoys it"
"Wealth consists not in having great possessions, but in having few wants"
"Time is the most valuable thing a man can spend"
- Laertius Diogenes
"The glow of one warm thought is to be worth than money."
"I don't care too much for money for money can't buy me love"
- The Beatles
"Simple, genuine goodness is the best capital to found the business of this life upon. It lasts when fame and money fail, and it is the only riches we can take out this world with us."
-Louisa May Alcott, Little Men
"And though I have the gift of prophecy, and understand all mysteries, and all knowledge, and though I have all faith, so that I could remove mountains, and have not charity, I am nothing."
"Not he who has much is rich but he who gives much"
"Life is what happens to you while you are busy making other plans"
"I pity that man who wants a coat so cheap that the man or woman who produces the cloth shall starve in the process"
A Guide to National Savings and Investments
- Government Backed
- Product Overview
- Income and Premium Bonds
- Direct Savers and ISAs
- Investment Accounts
- Other Products
- Should I use NS&I as a Saver/Investor?
National Savings and Investments (NS&I) are often neglected by financial advisers because they have been difficult and time consuming to arrange for clients.
At Interface Financial Planning we have our own online NS&I account where we can view our clients’ National Savings and help them to manage them.
Our direct access to NS&I enables us to easily obtain information and integrate this element of our clients’ assets into their financial planning.
This short guide will take you through all you need to know about National Savings and Investments and the products available for you to use.
The main attraction of NS&I savings products is that they are backed by the UK Government. This gives them a security which is very important to savers who want to ensure their money is at no risk of loss.
Not all savings products have this level of protection.
You can consider any money you place into and
hold in an NS&I account is as secure as it is possible to achieve.
This is one of their main attractions, probably the main attraction.
The NS&I Savings Products Available – July 2021
Please note: any interest rates quoted are correct as of 7th July 2021 and are subject to change from time to time. They are all variable rates, there are no guaranteed rates available currently for new savers.
When interest is paid to your account, could vary from product to product, so please be aware of this when considering your options (for example if you require monthly income).
Over the decades the products available from National Savings have varied, both in terms of the accounts, their names, terms and conditions, and the rates of interest payable.
It is therefore worth keeping an eye on anything new that is introduced or withdrawn, as it is not a constant suite of products, or terms available.
Working with us at Interface will help with this because we can keep you up to speed.
Products as of July '21
Probably the best known of the product range, Premium Bonds, originally launched in the 1950s, remain highly popular today and are held by more than 20 million people.
There is no set return from a Premium Bond, instead each £1 Premium Bond you own is entered into a draw every month, and you can win cash prizes (which are tax-free).
Probably the best known of the product range, Premium Bonds, originally launched in the 1950s, remain highly popular today and are held by more than 20 million people. There is no set return from a Premium Bond, instead each £1 Premium Bond you own is entered into a draw every month, and you can win cash prizes (which are tax-free).
Over a year, those winnings average out to the equivalent of 1.0% interest.
There is a minimum holding of £25 and a maximum of £50,000 per person.
Each month there are two main prizes of £1 million, giving savers a chance, albeit an extremely unlikely one, of a very big return.
In total there are over two million prizes paid out each month to Bond Holders.
There is an immediate withdrawal facility, so any savings held in Premium Bonds are not tied up.
This account has very high maximum investment limit. You can save from £1 up to a maximum of £2 million. Or in the case of joint holdings, £4 million. There is no penalty to withdrawing your money, and you do not need to give notice. The current rate of interest is 0.15% gross/AER. Interest is taxable, so you may have to pay tax.
This is an ISA account and is subject to the general rules applying to ISAs. For example, the current maximum amount available in a tax year for each individual to invest is £20,000 (as of tax year 2020/21).
As with any type of ISA the return you receive is tax-free. The current rate of interest is 0.1% gross/AER. The ISA can be cashed in at any time without notice. This is not a flexible ISA, so any deposits you make during the tax year will count towards your ISA allowance, regardless of whether you make any withdrawals. NS&I does not currently accept any transfers from other providers into the Direct ISA.
A savings product for your child or grandchild. You can invest up to £9,000 in the current tax year (2020/21). The current rate of interest is 1.5% AER. The account is for children under the age of 18. Money cannot be withdrawn, except by the child when they turn 18. At this time, the money will be transferred to an adult ISA, where they will have full control over it. The Junior ISA is tax-free. You can transfer an existing Junior ISA or Child Trust Fund (CTF) into a National Savings Junior ISA.
The Investment Account has a minimum of £20 and a maximum of £1 million (£2 million for jointly held accounts). Accounts can be opened for a child under the age of 16 by their parent, guardian, or grandparent. They, like Income Bonds, can be held in a Trust. There is no penalty to withdrawing your money, and you do not need to give notice. The current rate of interest is 0.01% gross/AER. Interest is taxable, so you may have to pay tax.
Other Products – which are NOT currently available to new savers.
As indicated earlier, the range of products offered by NS&I over the years has been considerable and we know, as well, there are plans to launch new products in the future. For example, there have previously been various series of Guaranteed Bonds. With fixed terms attached to them. These guaranteed either the rate of interest throughout the term or a capital amount to be paid at the end of the term. Whether these will be reintroduced at some point, remains to be seen and is a good reason why it is worth keeping up to date with the product range. If you do hold a product or an account which is no longer available, then it is very important to review it when it comes up to its fixed term end point. If you leave it unattended to, it may just sit in a residual account getting no return. There may also be opportunities to ‘rollover’ existing products into a new version, even if that product is not currently available to new savers. You should also review any product you hold comparing it to currently available products which could have better terms. As you may be able to switch from one to the other.
The Green Bond
In the near future we know that NS&I are due to launch a Green Bond. The exact date for this is yet to be confirmed, but it is imminent. These will be three-year fixed bonds for savers aged 16 and over. For sums between £100 and £100,000. The money raised via these Green Bonds by the Government will be used to help finance green infrastructure projects. As an individual saver you will have no direct involvement in the risk of these projects. You will get a set rate of interest, once again underpinned, and guaranteed by the Government.
Should I use NS&I Products as a Saver/Investor?
The security of the products, backed by the UK Government, certainly make them attractive. However, it must be noted that the rates of interest and return are currently very low. Lower, in fact, than the current rates of increase in the cost of living. If this persists for any length of time, then the real value of the capital amount you invest into any product is likely to be falling. Inflation will erode the value. Although they can be described as risk-free strictly from the point of view of the capital amount, they do carry a risk in terms of the “inflation risk” and this is real and meaningful. In addition, there are other forms of very low risk savings, from leading financial institutions, which may offer better rates of interest. Whilst these may be ever so slightly higher in risk than the NS&I products because the financial institution (such as a fully regulated bank or building society) cannot be described as safe as the UK government, they could have protection which provides security. For example, under the Financial Services Compensation Scheme (FSCS) the first £85,000 of your savings (or £170,000 if your money is held in a joint account) is protected if the bank or building society goes bust.
Note: the £85,000 limit applies per institution and not per account. Some institutions might cover more than one brand name, so this position is always worth checking carefully. It is easy to get caught out by this small – but important – point. We can help you with this, as required.
Getting Help and Advice
Deciding whether an NS&I product is right for you to save into, or invest in, is going to depend on factors which are unique to your situation, and your goals. There is no “one size fits all” or golden rule here. As safe and secure accounts, NS&I products can be of great value, but they may also offer inferior terms to other options. In addition, if you do decide to use one or more of these products you need to be wary, they have different aspects to them, such as the tax treatment, which could make some more beneficial for you than others. Analysing their value to you and whether to use them, and if you do save/invest, which ones to use, is something we can help with. As independent advisers we are in a position where we can analyse the full range of options you have, provide advice based on your unique circumstances and guide you as to the most suitable solutions. There is a lot of choice when it comes to savings and investments and having a steady and expert hand to help you can make a big, positive, difference.
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Readers should not rely on, or take any action or steps, based on anything written in this guide without first taking appropriate advice. Interface Financial Planning Ltd cannot be held responsible for any decisions based on the wording in this guide where such advice has not been sought or taken. The information contained in this guide is based on legislation as of the date of preparation and this may be subject to change.