National Savings and Investments
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National Savings and Investments (NS&I), formerly called the National Savings Bank, is a state owned savings bank in the United Kingdom. It is an executive agency of the Chancellor of the Exchequer. The aim of NS&I is to attract funds from individual savers in the UK for the purposes of funding the government’s public sector borrowing requirement (ie the funds in excess of taxation that the government requires to fund its activities). NS&I is based in Blackpool, Lancashire. NS&I attracts savers through offering saving products with tax free elements, and a 100% guarantee from HM Treasury over any deposits. NS&I also administers the Premium Bonds scheme.
Role
National Savings and Investments was founded in 1861 as the Post Office Savings Bank. The aim of the bank was to allow workers to save, and to provide the government with access to debt funding. The bank's name later changed to National Savings Bank, and later to National Savings and Investments.
NS&I manages around £72 billion in savings, 10% of the UK savings market. This accounts for 17% of the UK's national debt [link]. As funds from NS&I are a relatively cheap source of government borrowing, the bank sets interest rates both to attract savers and provide low cost finance for the government.
Many investors see premium bonds as a safe alternative to the National Lottery because they are only gambling with the interest - not with their capital (minimum investment is £100, the prizes range from £50 up to £1m).
Products
NS&I offer a wide range of products. The most popular is the Premium Bond. This is a bond of value £1 which is purchased by a holder and retained for an unlimited period of time. The holder receives no interest, but instead, each bond is entered into a prize draw announced each month. The top prize is now £1 million, with several tranches of small prizes from £1,000. The prize draw pays out approximately 2-3% of the total value of the fund each year. A computer known as ERNIE (Electronic Random Number Indicator Equipment) selects the winning bonds. Approximately 27 million people in the UK hold premium bonds, around 40% of the population and 8 billion bonds are in issue. Premium Bonds can be redeemed for face value at any time, a minimum holding of £100 and maximum holding of £30,000 is in place. All prizes are tax free.
Other products include tax free saving certificates, and tax free savings accounts.
A unique selling point of NS&I products is a 100% guarantee over any deposits placed by the Treasury.
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