National Savings and Investments or NS&I has been in the headlines a lot this year as the government-backed savings provider, best known for its Premium Bonds, has launched a series of table-topping savings offers. But how safe is NS&I and can you trust it to look after your money?
What is NS&I?
There’s a simple answer to the question, ‘How safe is NS&I?’ The answer is very safe.
The savings institution is backed by the UK government (HM Treasury), which means all savings are guaranteed 100% by the government. This is the case because NS&I is, in many respects, just another arm of the government.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
When the government is spending more than it’s getting in taxes, it has to borrow money to fill the gap. This borrowing is usually done by issuing what’s known as gilts. These are issued by the government and have a claim on any tax revenues. The government has only defaulted (not paid its bills) on these obligations once in the history of England, in the 1400s.
The government also borrows via NS&I. Every year when the beancounters in the government are trying to work out how much the country will need to spend and borrow, they charge NS&I with raising a percentage of the borrowing total.
The UK government has outstanding borrowings of around £2.6trn, of which around £300bn is looked after by NS&I.
But why would the government use NS&I rather than issue more gilts? It can generally raise money via NS&I more cheaply than on the international debt markets with gilts. NS&I savers also tend to be more sticky than international investors, giving the government more control over its debts.
Can NS&I go bankrupt?
Due to its structure, NS&I can’t go bankrupt. For savers’ money to be in jeopardy the UK government itself would have to be on the verge of bankruptcy, and if that happens, savers will have bigger problems to deal with (for example, who’s going to pay the police?).
There’s also no chance NS&I will be taken over by another bank or private equity firm. It’s very unlikely that the government will decide to sell it off as it wouldn’t want to lose control of that much debt.
So NS&I can’t go bankrupt nor can it run out of money. That means any savings you have with the institution are 100% guaranteed.
Is NS&I a good place to keep my money?
If you’re worried about the stability of other financial institutions, then NS&I is a good place to keep your money. But it’s worth keeping in mind that NS&I has a duty to taxpayers to achieve the best possible outcome by keeping costs low for the government. It does not have a duty to offer the best savings deals.
What’s more, due to its position in the market, demand for its products is often high so it does not need to try too hard to get business by offering high interest rates.
While the organisation will issue market-leading products if it’s in danger of missing its annual fundraising target, it has no obligation to do so.
What are the best NS&I products?
NS&I offers a range of products. They’re designed to appeal to a wide range of people and the lineup with change from time to time, but here’s a list of the main and most popular products offered by NS&I today:
These work in the same way as other easy access savings products and can be managed online.
Similar to the Direct Saver, the NS&I Investment Account isn’t really an investment account, as it does not put your money at risk. It's essentially a post-based easy access account.
Guaranteed Growth Bonds
These are similar to other fixed-rate bonds sold in 'issues', each with a specific interest rate for the duration of the bond. Savers can invest up to £1m per person per issue in these bonds.
65+ Guaranteed Growth Bonds
These bonds were introduced in 2014 and are only available for people over 65. There are stricter limits regarding the amount you can save than traditional Guaranteed Growth Bonds.
These bonds pay interest into your bank account each month for the duration of the issue.
Index-Linked Savings Certificates
These are very limited products, sold in small issues that tend to be snapped up quickly. Each year the investment's value moves in line with a measure of inflation called the Retail Price Index (RPI), and they must be held for the full term. If you decide to cash out early you’ll have to pay a penalty.
One of the most popular products from NS&I with over 21m people holding £51bn in bonds. These bonds offer the chance to win tax-free cash prizes and for each £1 invested, you get a chance of winning. If you save £500, you'll get 500 bonds and 500 chances to win a cash prize. Cash prizes vary between £25 and £1m and there are two £1m prize draws every month.
Jacob is the founder and CEO of ValueWalk. What started as a hobby 10 years ago turned into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, Jacob worked as an equity analyst specializing in mid and small-cap stocks. Jacob also worked in business development for hedge funds. He lives with his wife and five children in New Jersey. Full Disclosure: Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest.
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published
One-year fixed savings drop below 6% - have they reached their peak?
The best one-year fixed-rate savings deals have fallen below the 6% mark. Find out if saving rates have reached their peak and the current top rates on the market.
By Vaishali Varu Published
NS&I cuts interest rate on Green Savings Bonds - where can you get a better deal?
News The state-backed bank has slashed the interest rate on its Green Savings Bonds from 5.7% to 3.95%
By Marc Shoffman Published
November NS&I Premium Bonds winners - check now to see what you won
If you have money saved in NS&I Premium Bonds you can now check to see whether you have won a prize in the November prize draw. Here’s how to check your Premium Bonds.
By John Fitzsimons Published
October NS&I Premium Bond winners - have you claimed your prize yet?
October NS&I Premium Bond winners were announced earlier this month - but have you claimed your prize yet? Here’s how to check you have not missed out
By Vaishali Varu Published
Act fast: HSBC to pull its 5.7% one-year bond
Savers have until Wednesday to apply for HSBC’s one-year fixed-rate bond. The withdrawal of the account follows NS&I’s decision to pull its market-leading one-year bonds earlier this month. We explain why you need to act fast to secure the best rates.
By Ruth Emery Last updated
NS&I withdraws market-leading 6.2% one year fixed bond - what are the alternatives?
National Savings & Investments (NS&I) has now dropped its one year fixed bond paying a table topping 6.2% interest rate a month after launch. Here’s where to find the next best alternative for one year fixed savings
By Kalpana Fitzpatrick Last updated
October’s NS&I Premium Bond winners revealed - have you scooped £1 million?
Two lucky NS&I Premium Bond winners are now millionaires this October. Find out here you are one of them
By Kalpana Fitzpatrick Published
NS&I versus other savings providers - where should you put your money?
We ask whether it’s worth going with the government-backed organisation, or whether other savings providers offer a better deal?
By Ruth Emery Last updated