Is NS&I safe?

National Savings and Investments (NS&I) is popular for its premium bonds and savings products. But how safe is it?

A padlock appears in front of pound coins
Is your money safe if you hold it with NS&I? (images: Getty Images)
(Image credit: Getty Images)

National Savings and Investments (NS&I) is one of the best-known names in the UK savings market. The treasury-backed provider is popular for its Premium Bonds. But it has also grabbed headlines in the past when compared with the best savings accounts, for example with its market-leading one-year fixed bond last summer, and more recently the launch of its new British Savings Bonds. 

Having made two more people millionaires through the monthly Premium Bond winners draw, you may be wondering if NS&I could be a good destination for your money. So, how safe is NS&I? Can you trust it to look after your money? Here's everything you need to know. 

Is NS&I safe?

The answer is yes, it's very safe. The savings bank is backed by the UK government (specifically, HM Treasury), which means all savings are guaranteed 100% by the government. This is the case because NS&I is essentially an arm of the government.

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When the government is spending more than it gets in taxes, also known as a budget deficit, it has to borrow money to fill the gap. This borrowing is usually done by issuing what are known as gilts or bonds. These IOUs have to be paid back with interest over a set period of time – usually decades. The government has only defaulted (not paid its bills) on these obligations once, and that was way back in the 1400s.

The government also borrows via NS&I. Every year when Treasury ‘bean counters’ 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. 

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 would have bigger problems to deal with anyway (for example, who’s going to pay for the police?)

There’s also no chance NS&I will be taken over by another bank or private equity firm. It’s highly unlikely the government would decide to sell it off as it wouldn’t want to lose control of that much public 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.

By way of comparison, just £85,000 of your savings are covered under the standard Financial Services Compensation Scheme (FSCS). The FSCS applies to all UK regulator-approved financial institutions, including building societies and banks.

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 savings rates. While the organisation sometimes issues market-leading rates, 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 line-up changes from time to time. Here are some of the most popular products offered by NS&I.

Direct Savers

These work in the same way as other easy-access savings products and can be managed online. NS&I recently upped the rate on its Direct Saver from 3.65% to 4% AER. If you're on the hunt for the best easy-access savings account, it’s worth checking how the NS&I Direct Saver compares to the rest of the market.  

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 £1 million per person per issue in these bonds. Two of four NS&I British Savings Bonds fall under the Guaranteed Growth Bonds, requiring savers to fix their cash for either one or three years. The NS&I one-year fixed Bond is returning 4.5% AER and the NS&I three-year fixed Bond is offering 4.15% AER. Interest is paid when the account matures.  

Guaranteed Income Bonds

Currently, two of the NS&I British Savings Bonds also sit under the Guaranteed Income Bonds offering 4.5% AER when you fix your cash for one year, or 4.15% AER under a three-year fixed term. In contrast to the Guaranteed Growth Bond, interest is paid monthly rather than when the account matures, either after one year or three years.  

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 Prices 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. Currently, Index-linked Savings Certificates are not on sale. 

Premium Bonds

One of the most popular products from NS&I are Premium Bonds which offer the chance to win tax-free cash prizes. 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 £1 million, and two Premium Bond holders win the £1 million jackpot each month.

Jacob Wolinsky

Jacob is an entrepreneur, hedge-fund expert and the founder and CEO of ValueWalk. 

What started as a hobby in 2011 morphed into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund. 

Before devoting all his time to ValueWalk, Jacob worked as an equity analyst specialising 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. 

Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest that could arise from buying individual stocks.

With contributions from