What are national savings and investments? NS&I explained

National Savings and Investments (NS&I) is a savings bank owned by the UK government. It offers premium bonds and a range of other savings and investment products, including easy access savings accounts and ISAs.

NS&I has been around since 1861 when it was called the Post Office Savings Bank. The bank’s goals were to provide a safe place to save and a source of funds for government borrowing – these are still NS&I’s goals today.

About 25 million people have some sort of NS&I savings or investment account.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “NS&I is a national treasure, and the fact that your money is 100% guaranteed by the Treasury is a major draw for savers, especially at a time when so many many things in life are so uncertain.

What is NS&I?

NS&I is best described as a ‘government savings bank’ – and it’s the only one of these in the UK (other countries have them too, backed by their respective governments).

Unlike other banks, there are no shareholders in NS&I, but rather ‘stakeholders’, the most important of which is the UK taxpayer. NS&I only offers savings – you cannot get an NS&I mortgage, checking account or credit card.

When you save or invest with NS&I, you are actually lending your money to the government. When NS&I sets its interest rates, it is forced to balance the interests of savers (by offering decent rates) and taxpayers (by raising funds for the government).

Some products are unique to NS&I, such as index-linked savings certificates and premium bonds. But others are similar to savings accounts available elsewhere.

What accounts can I open with NS&I?

Product Minimum investment Maximum investment Age limit Individual or joint accounts Opening and managing your account
Income bonds £500 £1 million 16 Both Online, phone, mail
Direct ISA £1 £20,000 (per year) 16 Uniquely Online, phone
Premium bonds £25 £50,000 16 Uniquely Online, phone, mail
ISA Junior £1 £9,000 (per year) From birth (opened by a parent) Uniquely On line
Direct Saver £1 £2 million 16 Both Online, phone
Green Savings Bond £100 £100,000 16 Both Online, phone
Investment account £20 £1 million 16 Both Job

What are the pros and cons of NS&I?

A big selling point is that funds held in any NS&I account are 100% backed by the UK Treasury.

Anna Bowes of Savings Champion says this unique protection is a real advantage of NS&I. “All banks and building societies are covered by the Financial Services Compensation Scheme – which protects up to £85,000 per person, per supplier, should the worst happen,” she explains, “Because NS&I is Backed by HM Treasury, 100% of all money deposited with the provider is guaranteed.

Another positive is that NS&I offers premium bonds. This unique savings product gives you a chance to win a cash prize of up to £1 million every month.

Rachel Springall, finance expert at Moneyfacts, says: “Premium bonds could be a useful savings vehicle for those looking to win the draw. But savers can also cash in their bond at any time, which could be ideal for those who need to get their money back amid the cost of living crisis.

It should be noted that rising inflation erodes the purchasing power of savers’ money if their pots do not earn interest at a rate above inflation. Premium bonds pay no interest, so unless you receive a large gain, your money will lose value in real terms.

But some other NS&I accounts rarely offer the best interest rates to savers.

“Anyone with money in Direct Savers is missing out on a better rate elsewhere,” Coles says. “The Direct Saver will save you up to £2m with the institution, and it’s all guaranteed. It might seem like an easy fix for savers with huge balances, but they could do a lot better by distributing their money to the most profitable accounts.

NS&I Income Bonds

Income Bonds are easy-to-access savings accounts that pay interest directly to your bank account each month.

They can be a good option because you’ll get regular income from your savings and you can withdraw your money without notice or penalty. On the other hand, you will not benefit from compound interest because the interest is paid into your bank account each month.

NS&I Direct Isa

It is a cash ISA, which accepts wire transfers from other providers. You can save some or all of your £20,000 annual ISA allowance in the NS&I Direct ISA.

You can withdraw your money whenever you want, and without penalty. However, you can find other easy-to-access cash ISAs with much higher interest rates.

NS&I Premium Bonds

NS&I Premium Bond Price Checker

(Image credit: NS&I)

Premium Bonds give you the chance to win tax-free prizes from £25 to £1 million each month. Bonds cost £1 each, but you must buy them in batches of 25.

The odds of winning anything are around 24,000 to one every month.

There is no interest paid on premium bonds, but NS&I often quotes the “prize fund annual rate”. This rate describes the average payment and currently stands at 2.2%.

The main selling point of Premium Bonds is that you could win £1m, although there are plenty of smaller prizes too. You can also buy bonds as gifts for children.

But the odds are not in your favor. If you’ve invested a maximum of £50,000, you’ll probably see a regular supply of £25 in prizes at best. The big risk is that you might win

NS&I Junior Isa

This is a tax-free savings account for children up to age 18. The Junior ISA allowance is £9,000 for the 2022-23 tax year.

ISA Juniors are a great way to save for your child from birth. But the money becomes theirs when he turns 18. He can spend it as he sees fit and there is no guarantee that your child will make wise choices.

NS&I Direct Saver

This is an easy-to-access account that pays interest annually.

On the plus side, you can add money to your account or withdraw it whenever you want. But on the downside, you’ll find better interest rates on NS&I fixed rate accounts, or easy-to-access savings accounts elsewhere.

NS&I Green Savings Bond

It is a three-year fixed rate bond that promises to invest the money in environmentally friendly projects.

It’s a decent savings product if you want your money to fund green infrastructure products. But you can’t access your money until the end of the term, and the interest rate is easily beaten by ordinary three-year bonds.

NS&I Investment Account

This cash account can be opened for a child under 16 by their parent, guardian or grandparent. You can also invest in trust for someone else.

Interest is paid annually and you can make withdrawals whenever you want.

However, the interest rate is very low (0.01%).

Which NS&I accounts are tax-exempt?

“Very few accounts available to new clients are tax exempt these days – just the Cash ISA, Junior ISA and Premium Bonds. As with all ISAs, the returns from its Direct ISA and Junior ISA are paid tax-free,” says Anna Bowes of Savings Champion.

Returns from Indexed Savings Certificates and Fixed Interest Savings Certificates are also tax exempt, but these products are not available at this time.

Tax is due on gross interest from NS&I savings accounts such as Direct Saver, Investment Account and Green Bonds. But for most people, this will fall under their Personal Savings Allowance (PSA).

Can I invest with NS&I if I don’t live in the UK?

Although NS&I is a UK savings provider, you can save and invest with them if you live outside the UK.

To do this you will need a UK bank account or a building society in your name. This is because NS&I can only make and receive payments from a UK account in pounds sterling.

NS&I accounts not currently available

NS&I Guaranteed Income Bonds

NS&I Guaranteed Income Bonds operate as fixed term savings accounts with terms of one, two, three or five years. You are “assured” of income on your savings because the interest rate is fixed for the duration of the term.

Guaranteed Income Bonds are not currently on sale, but existing customers can renew a maturing bond.

NS&I Guaranteed Growth Bonds

NS&I Guaranteed Growth Bonds are similar to other fixed rate bonds and allow you to invest up to £1m per person, per issue, in a single lump sum. The interest rate is guaranteed for the duration of the bond.

Bonds are sold in “issues” with limited availability – there are none on sale at the moment, but existing bondholders can roll over a maturing bond.

Index savings certificates

These are issued for two, three and five years with an interest rate linked to CPI inflation (before 2019 it was linked to RPI inflation). Returns are typically 0.01% above inflation and are paid tax-free.

“If you are lucky enough to have some of these, you should think very carefully before cashing in on them, especially at this time with such high inflation,” says Bowes, “They guarantee to pay a return slightly above inflation, as measured by the Consumer Price Index (CPI). At maturity, you can renew up to the full value of your maturing certificate, including all interest and indexing earned.”

Fixed interest savings certificates

They are basically fixed rate bonds issued for terms of two and five years and which pay a fixed rate of interest for a fixed period of time.