Everything you need to know about National Savings & Investments

National Savings & Investments (NS&I) made headlines recently when it announced that, from November 2020, it will reduce interest rates on its products as well as reduce the odds of winning prizes in their Premium Bonds draw.

Despite this, NS&I still offers a variety of products for savers and there may be one that suits your needs. Read on to find out everything you need to know about NS&I and the products they offer.

NS&I is a Treasury-backed bank who have operated since 1861

NS&I was initially set up more than 150 years ago to promote a culture of saving among the British people. Because it is a state-backed bank, when you save with them you are essentially loaning money to the government.

The main advantage of saving with NS&I is that, since it is backed by the Treasury, there is a zero chance of you losing your investment. Since investments with NS&I are completely safe, it makes it ideal for people who are averse to risk.

However, while your money is guaranteed to be safe, the rate of interest on NS&I products isn’t typically very high compared to other types of investments, such as investing in Stocks and Shares.

NS&I offer a variety of products from bonds to ISAs

With NS&I, there are many savings products to choose from with options to suit every kind of saver. Here are the six most popular:

1. Premium Bonds – Originally launched in the 1950s to encourage post-war saving, each £1 bond is entered into a monthly draw to win a tax-free cash prize which can be as high as £1 million.

The closest thing that Premium Bonds have to an interest rate is a prize rate. Currently, this rate stands at 1.4%, although it is set to drop to 1% in November. Premium Bonds are ideal for people who are averse to risk or people who want the excitement of winning the million-pound prize. However, bear in mind that if you don’t win any of the prizes that are available, your interest rate is essentially zero.

2. Direct Saver – With this type of savings account, you can save up to £2 million per person, and you can open an account with only £1.

You can pay into, or make withdrawals from, this account without paying any charge and this can be done both by phone and online. A Direct Saver is suited for people who have low tolerance of risk and want to be able to instantly access their savings.

3. Income Bonds – Income Bonds are generally a safe and simple way to earn additional income every month and can be purchased with a minimum investment of £500. They can also be a good investment for people who want to hold their savings in a trust.

Like all products that NS&I offer, these bonds have a variable rate of interest. This means that returns on this product are not guaranteed.

4. Direct ISA – A Direct ISA is a Cash ISA (Individual Savings Account) which means that any interest you earn on your savings is paid tax-free. There are several types of ISAs, and there is a limit to how much you can deposit across them in one tax year. The 2020/21 subscription limit is £20,000.

Direct ISAs are a good product to invest in for people who have a low tolerance for risk, want tax-free returns, or want to be able to easily access their money. If you already have another type of ISA, make sure to check that you have a remaining ISA allowance before you consider starting a Direct ISA however.

5. Junior ISA – These ISAs are designed for children and people under the age of eighteen. They offer the highest interest rate out of all NS&I products but cannot be accessed until the owner reaches their 18th At this point, the funds in the Junior ISA will be transferred to a Direct ISA.

This type of ISA is perfect for parents who want to open a savings account for their children, as it offers a high interest rate, and the money is locked away until your child comes of age.

6. Investment Account – You can open an investment account with as little as £20, and then keep it open with just £1. If you are a parent, grandparent, or guardian you can open an account on behalf of a relative who is under the age of sixteen.

It’s important to note however that this type of account is a bit old-fashioned, as it cannot be managed online or over the phone. Despite this, investment accounts can be well-suited for people who want to open a savings account on behalf of a child or grandchild.

Get in touch

If you’re thinking of opening a savings or investment account for yourself or a loved one but aren’t sure which is right for you, we can help. Email enquire@london-money.co.uk or call us on (0207) 808 4120.