National savings and investment (NS&I)
National savings and investment is a government backed form of savings account, meaning that they offer a secure way to store your money away. They benefit from having no limit to the amount that the government will protect, in contrast to normal bank's savings accounts.
This guide will explain everything you need to know about NS&I accounts and what their benefits are.
When you save with a normal bank or building society, the government can only secure up to £85,000 per bank in the event of the organisation collapsing. What this means in reality is that if you have a shared account with £100,000 in it, there is a very real possibility that you could lose up to £15,000.
National Savings and Investments offer a large range of products such as cash ISAs, premium bonds, EASA, children bonds, income bonds and standard accounts.
In This Guide:
- NS&I easy access savings accounts
- Cash ISAs with NS&I
- Saving certificates
- Children's bonds from NS&I
- Premium bonds
- Guaranteed bonds
NS&I easy access savings accounts
This is the standard ordinary account offered by National Savings and Investments under a new name. This may sound strange but the interest that you receive on these is taxable but any interest you receive will be tax free, the tax is removed after the interest is paid.
Cash ISAs with NS&I
In contrast to the standard account offered by NS&I, the cash mini ISA is exempt from tax. This means that you are under no obligation to inform the tax man about any money you make from the account in question.
In the same way as with all ISAs there is limit to the amount that you are permitted to deposit each year. This limit sits at £15,240 as the start of the 2015/16 tax year. With every year that passes you can top up your ISA by that amount again.
Saving certificates from NS&I are free from tax but are not as readily available to due to the limited amount that can be given out. Similarly to most different savings accounts the NS&I savings certificates can be either fixed or index linked. This means that you have the choice between receiving one fixed rate of interest or earning an amount that is directly linked to inflation.
The safest option, in terms of saving, tends to be an index linked account due to the fact that you do not need to be concerned about losing out in comparison to inflation. However accounts such as these normally ask for a longer term of commitment.
Children's bonds from NS&I
Many savers are now choosing to put money away money for their children in bonds offered by National Savings and Investment. These bonds are also tax-free.
These children's bonds represent a longer term investment and are provided in things known as "issues". There is a fixed amount of interest with each one of these issues and they pay out on a regular basis. Bonds are taken out for five years at a time, once this period is over you can choose whether or not to remove all of the money or you can extend the bond by another five years.
There is a limit of £3,000 that can be saved in a children's bond. The minimum sum that you can deposit is £25 and you are only able to deposit in one sum for each issue. Only children under the age of 16 can take out one of these bonds.
The last available form of tax free saving from NS&I are premium bonds. You can save up to £30,000 in a premium bond but they have a different way of paying out than normal savings accounts.
These bonds do not pay out interest in the same way as standard savings accounts do, instead you will be entered into a prize draw that happens every month. The average prize pays out at £50 but there is a chance that you could win up to £1 million.
But it is important to remember that you are not in any way certain of winning a prize and you will continually lose out to inflation due to the fact that there is no interest paid on these bonds.
NS&I also offer guaranteed bonds that will pay out a fixed amount. This means that you are aware of the precise amount of money that you will receive from these bonds, however these bonds are not tax free. Depending on which tax band you are in, you could pay 20-40% tax.