Most people I know have a little bit of their savings squirrelled away in government-backed bank National Savings
Although love is too strong a word to use when talking about how customers view any of this country’s financial institutions, most savers do trust National Savings & Investments (NS&I). It is more liked than despised.
It is certainly more liked than the big banks and most building societies, even if it is guilty of using some of the same tricks as its rivals – for example, suddenly cutting savings rates or withdrawing popular products as it did at the beginning of September with the removal of its one- and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds.
Our fondness stems primarily from its formidableness. Irrespective of the economy’s health (currently in deterioration mode), financial crises (think 2008), government turmoil (think now) and political machinations (all the time), NS&I is always there standing firm. Solid as the rock of Gibraltar. Part of the country’s financial fabric.
It is the equivalent of a port in a storm, offering its 25 million customers something no other savings rival can do – safety irrespective of the amount that is saved with it.
For NS&I customers, there is no worry about ensuring their savings are safeguarded by the Financial Services Compensation Scheme if their bank or building society hits the buffers – currently set at £85,000 per savings institution. Reassuringly, at every twist and turn, Her Majesty’s Treasury sits four square behind them.
Equally, NS&I is a harbour in calmer times, providing an array of attractive products for savers with specific requirements – be it a need for monthly income (Income Bonds), tax-efficient savings for either children (Junior Isa or Jisa) or adults (Direct Isa), or bog-standard savings accounts that can be operated both online and by phone (Direct Saver) or by post (Investment Account).
Yes, the interest rates may not be the best on offer – ranging from 0.8% on an Investment Account through to a more mouth-watering 3.25% on its Jisa– but that’s not really the point. Most savers are prepared to sacrifice a little in interest in exchange for the reassurance that NS&I provides.
Of course, I’ve saved the best NS&I product to last – Premium Bonds that offer holders participation in a monthly draw with tax-free prizes on offer from £25 up to £1million. The average prize rate is currently equivalent to an annual 1.4% and bonds can be bought from as little as £25.
My three sons – Matthew, Mark and James – are all big supporters of good old Premium Bonds. They have been ever since I and my generous mother-in-law, Betty, started buying them bonds as youngsters for Christmas and for their birthdays.
Admittedly, the gifts were not always welcome at the time – “Dad, we wanted video game Football Manager 2008” – but the boys have all grown to love the bonds as they have moved into their 20s and become financially independent. A steady drip of prizes – a £25 here, a £50 there – has kept them interested.
Indeed, my middle son Mark won’t say a bad word about them. Unlike his brothers and for that matter his Dad, he seems to enjoy the luck of the Irish, winning a prize at least once every other month. My modest Premium Bonds’ holding has yet to yield a single prize although I’m adding to it every month in the hope of greater success.
Lots of my friends – all in their 50s and 60s – now hold the maximum £50,000 in Premium Bonds and would buy even more if they were allowed to do so. Yet I think NS&I has got it right in now, preferring to refocus its eye on younger savers and encouraging them to take up good savings habits.
It has done this with its Jisa – only one provider currently offers a better interest rate (building society Coventry) – and it has also just done it with Premium Bonds by removing the restriction that only allowed parents and grandparents to buy them on behalf of children and grandchildren. Now, aunts, uncles, godparents and family friends can give children the gift of a Premium Bond – with purchases made either online or by post.
Premium Bonds have their drawbacks. Prizes are not guaranteed (as I am finding out to my cost) and while the bonds can always be cashed in at face value, it doesn’t protect them from the ravages of inflation. But if they encourage the children of today to become the adult savers of tomorrow, we should laud them, not pick fault with them.
It is my contention that every savings portfolio should have a sprinkling of National Savings. Does yours?
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