Is National Savings and Investments really the best place for your money?
Over recent months National Savings and Investments has enjoyed a massive spike in popularity with the British public. With interest rates at an all time low, the stock market floundering and high profile news reports of struggling banks and building societies on the brink of collapse, people suddenly want to put their savings and investments into a financial institution that has the security of being 100% backed up HM Treasury.
It may not be exciting, but at least your money is safe with National Savings and Investment – a reasonable, sensible sentiment. But is NS&I really the best place to put your money in the current climate? The truth is that the government will guarantee to protect up to £50,000 of your savings in almost any UK bank or building society if it goes bust, so the argument that NS&I provides the most security for your money doesn’t really hold up unless you happen to have more than £50k in cash savings, which the majority of people don’t.
It’s not as if National Savings and Investments offer a particularly attractive return on any of its products either. We took a look at the various savings and investments on offer to see what kind of return you could expect:
Premium Bonds – these were never a great bet to begin with, since you rely largely on chance to make a return, and now the chances of winning enough prizes on the Premium Bonds to beat other investments is lower than ever.
Direct ISA -the National Savings and Investments cash ISA offers just 1.3% interest on your money (and this is variable) which seems very stingy compared to the 3-4% you’ll find if you shop around at the high-street banks.
Fixed Term Bonds – both the NS&I growth and income bonds currently offer a maximum annual return of 2.6% over a 5 year period. But a quick look around offers available from high street banks (which are all covered by the government’s scheme to protect your savings) shows that you can find fixed five year growth and income bonds offering over 4% per annum.
There will always be people who prefer the absolute security of putting their money in a HM Treasury backed investment, and for those with over £50k to invest it might even be considered prudent to use National Savings and Investments. However, for the majority of people it’s hard to see what the benefit of putting their money with NS&I really is – most high street banks offer just as much security and far better returns on your money.