NS&I stands for National Savings and Investments and is a wholly owned Government organisation.
What does that mean for you?
It means that should you wish to invest in NS&I products, you will be lending money to the Government. Your money is 100% secure, so there is no risk in losing your money, so it can be a good option for very investment risk averse savers.
The product you are mostly likely to recognise is premium bonds.
You can invest anything from £25 to £50,000 in premium bonds. In return you will go into a monthly prize draw to win anything from £25 up to £1million. Any win is tax free.
Premium bonds can be purchased for children under the age of 16 – as a gift.
Whilst premium bonds can give you a return, by way of a win, there are no guarantees. This makes it unsuitable for investors looking for a guaranteed return or income. On the plus side it is easy to both purchase bonds and cash them in when you need to. Achieving a win can provide an unexpected bonus, but the odds of winning are relatively low. Clearly the more you invest the higher your chance of winning.
Moving on from premium bonds, NS&I also offer Income Bonds.
There is a minimum investment of £500, and a maximum of £1million.
Income bonds pay interest at a variable rate, based on the Bank of England base rate. At the time of writing it is 1.15% gross per annum, but we would encourage you to check this at the time of investing. Interest is paid every month – directly into your bank account, not building up your savings.
Income bonds are easy to manage and give you easy access to your money, when you need it. Whilst they do provide a monthly income, returns are not guaranteed and are relatively low.
The other well known product is the Junior ISA.
The Junior ISA is a long term tax free savings plan for children under the age of 18.
The interest rate for this product is also variable, based on the Bank of England base rate. As we write this, the current rate is 3.25% per annum but please check before making any savings decision. The interest is paid annually into the ISA to build up the savings balance.
You can open an account for your child if they are under the age of 16. Children of 16 or 17 years of age can open their own account, or you can do so for them. The minimum investment is £1, and the maximum investment depends on the annual allowance. Currently the maximum is £9,000 per tax year.
Junior ISA’s can be a nice way of introducing children gently into money management. They can see their savings building up but cannot access their money until they are 18.
Moving on from the Junior ISA, you can also purchase a Direct ISA.
The rate is variable and is currently 0.9% per annum. As with all ISAs the interest is tax free. The maximum investment allowance is currently £20,000 per tax year.
NS&I also offer direct savings accounts and investment accounts. Again, both guaranteed with relatively low interest, but a good solid option for very Investment risk averse savers.
So, what’s our summary of investing with NS&I?
As with all financial decisions, it depends on your personal situation. The returns are not as competitive as many other financial products, but it does provide the security of knowing your money is safe.
We have a number of clients who choose to invest in premium bonds, leaving the maximum invested, and seeing any win as a little windfall. They tend to invest other sums elsewhere to achieve better results.
If you would like specific advice as to whether or not to take out an NS&I product, please contact us on 01344 875 310.