Pearson Hinchliffe Financial Services - Advising - Supporting - Delivering

E-mail: enquiries@pearson-hinchliffe.co.uk | Telephone: 0161 785 3500

A Guide to National Savings and Investments

Originally set up by the British Government in 1861 as the Post Office Savings Bank, National Savings & Investments (NS&I) products are intended to encourage people to save for the future, to provide a secure home for their savings and to generate a valuable supply of funds for the UK Exchequer. When individuals invest in a NS&I product, they are lending money to the UK Government. In exchange, the Government guarantees the safety of their capital and provides an additional incentive in the form of interest, Premium Bond prizes or returns linked to the performance of the UK stock market.

NS&I offers a range of products aimed at investors looking for income or growth, for investors seeking tax-free products or for those wanting to protect themselves from the effects of inflation. Simple, straightforward savings accounts and investments for children are also available, as are Premium Bonds, probably the best-known of all the NS&I products. Today, NS&I has a total of nearly 27 million customers* with over £94 billion invested* - and more than 23 million people* hold Premium Bonds.

NS&I is probably the most secure place for UK savers to invest their money. All the products are backed by the UK Government, so, unless the country finds itself in serious financial trouble, investors can be certain that their capital is safe. However, this safety comes at a price. Greater security means lower risk and investors pay for this peace of mind by sacrificing higher returns which they might potentially earn from a more risky investment. 

Nevertheless, the effect of exceptionally low UK interest rates is keeping returns on all deposit based accounts low at the moment. Combined with the nervousness caused by the failure of some high-profile financial institutions, the result has been a surge in demand for these Government-underwritten NS&I accounts. Basically, with the difference in the interest rates currently on offer from different deposit accounts being quite small, there is little payback for taking on additional risk. This has driven some investors towards the lowest risk options 'just in case'.

Some building societies, which have struggled to attract inflows to their savings products in the current climate of low interest rates, have been lobbying the government to make NS&I products less competitive. Indeed, more recently, NS&I has actually withdrawn some of the more popular accounts. It does not want to be seen as offering the most competitive rates, believing that the guarantee of total security is, in their case, the more significant incentive for investors.

For more information on National Savings and Investments, and on finding the most tax-efficient products for your circumstances, contact us using the details below.

Pearson Hinchliffe Financial Services | Hollinwood Business Centre, Albert Street, Hollinwood, Gtr Manchester, OL8 3QL
Telephone: +44 (0)161 785 3500, Fax: +44 (0)161 624 2589, Email: enquiries@pearson-hinchliffe.co.uk