Your comprehensive guide to National Savings and Investments


In recent years, savers have struggled with persistently low interest rates, meaning that keeping your savings in cash might not have generated stellar returns.

Investing in the stock market is typically the first place many people turn to when they want to avoid low interest rates. However, due to recent periods of market volatility caused by the coronavirus, many potential investors are hesitant to expose themselves to risk.

If you want to grow your wealth but are unsure about traditional investing, read on for your comprehensive guide to National Savings & Investments (NS&I).

NS&I are a Treasury-backed bank that has operated since 1861

The government founded NS&I over 150 years ago to promote a culture of saving among the British people.

According to statistics published on the NS&I website, the bank now has over 25 million customers with more than £179 billion invested with it.

When you invest in their products, you are essentially loaning your money to the government. Since the bank is backed up by the Treasury, anything you save or invest with them is completely safe.

NS&I offer a range of saving and investment products

NS&I offer a variety of products that you may be interested in. Here are six of the most popular:

Premium Bonds

Originally launched in the 1950s after the second world war, when you buy Premium Bonds each £1 bond is entered into a monthly draw to win a tax-free cash prize.

Essentially, these bonds act like a lottery, giving you the chance to win up to £1 million each month. Instead of having an interest rate, premium bonds have a “prize rate” of 1%.

Premium Bonds are ideal for people who are risk-averse or want the excitement of winning the £1 million prize. However, if you don’t win any prizes, your interest rate will effectively be zero.

Direct Saver

This functions much like a high-street savings account, as an easy-access account in which you can hold cash. You can open an account with just £1 and can save up to £2 million.

You’ll receive interest on any money you hold in a Direct Saver although, since they have a variable interest rate, the amount of income you can draw may not stay consistent. Any income you make from interest could also be subject to tax.

The Direct Saver can be useful if you have large amounts of cash that you want to be able to hold in an easily accessible account.

Income Bonds

Much like a Direct Saver, Income Bonds offer a monthly rate of interest on your cash.

With a minimum payment of £500, up to a maximum of £1 million per person, Income Bonds receive regular payments in the form of monthly interest.

Money held in Income Bonds is easily accessible and have no penalties for making withdrawals.

However, the interest rate on Income Bonds is variable, so it can fall while you hold your money. You may also pay tax on any interest you make.

Direct ISA

An Individual Savings Account is a tax-efficient way to save money, as any interest is free from Capital Gains Tax and Income Tax. For the 2020/21 and 2021/22 tax year you can save up to £20,000 across your ISAs.

A Direct ISA is a type of Cash ISA, which makes them ideal for anyone looking to grow their wealth in an easy and low-risk way. You can start saving into a Direct ISA with as little as £1, and there are no penalties for withdrawing.

Bear in mind that the ISA allowance counts across all ISAs you may already hold, so check to make sure you won’t exceed the limit. You also cannot transfer in a pre-existing ISA into a Direct ISA.

Junior ISA

These are savings accounts specifically designed for children. They have a separate ISA allowance, which is £9,000 for the 2020/21 and 2021/22 tax year.

Much like a Direct ISA, a Junior ISA is a tax-efficient savings account for holding money in cash. This makes them a great choice for parents who want to start saving for their children.

One thing to bear in mind is that any deposits are locked into the account until the child turns 18. At this point, the account will automatically be transferred to a Direct ISA.

Investment Account

You can open an Investment Account with as little as £20 and you can pay up to £1 million into it. It is essentially a savings account by post.

One major benefit of this type of account is that it can be jointly managed, giving parents more input for how it is managed. Parents and guardians can also open one on behalf of a child.

However, you may have to pay tax on any interest an Investment Account generates. They can also only be managed via post, not online or over the phone, which may mean that managing the account is slower than you’re used to with online banking.

Get in touch

If you’d like to know more about whether NS&I products are right for you, please get in touch. Please email or call 0115 933 8433.

Please note:

The Financial Conduct Authority does not regulate NS&I products.