THE success of National Savings & Investments (NS&I) indicates an inconsistency in the national character. People who always have a bone to pick with government policies, whoever is in power, will still be devotees of NS&I despite its status as an executive agency of government and a source of funds for the Treasury.
NS&I’s results for the year to March, out today, are further proof of this attachment. Evidently, there is nothing quite so appealing as NS&I’s moneyback guarantee.
Some of NS&I’s most enthusiastic followers are higher-rate taxpayers, whose numbers have swelled to close to 3.5 million under the Blair Government. These savers, assailed on every side by stealth taxes, seek refuge in NS&I’s tax-free schemes.
Booming NS&I feels that, given its other advantages, it does not need to be a market leader: its deposit accounts are proof of this. The rates on the Investment Account, where one month’s notice is needed for withdrawals, range from 3.25 per cent to 4.15 per cent — you can do better elsewhere. The same applies to NS&I’s cash mini-Isa, which has a rate of 4.45 per cent — Abbey offers 5.35 per cent.
NS&I’s newish Easy Access savings account pays from 2 per cent to 4.55 per cent, again nothing out of the ordinary, but certainly better than the formerly far from Ordinary Account, launched in 1861 and recently withdrawn from sale.
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More than 12 million people have yet to move their money (more than £400 million) from the Ordinary Account, which says something about their loyalty to NS&I — and their maths. The rates range from 1.1 per cent to 1.2 per cent. For the Chancellor, this is extremely low-cost financing; a thought that could serve as an incentive to unearth your old Ordinary Account pasbook and either close the account or, if you must, transfer the money to Easy Access (for further details, telephone 0845 3666667).
Financial advisers fail to be excited by the savings accounts, saying that large and secure institutions offer superior returns. You can earn 4.9 per cent in Halifax’s Web Saver, for example.
However, Patrick Connolly, of John Scott & Partners, adds that higher-rate taxpayers who want a combination of a good rate and security should look at savings certificates. The ninth issue of index-linked certificates offers inflation-proofing plus a fixed rate of 1.1 per cent — all tax-free. Assuming inflation of 3 per cent, this gives a higher-rate taxpayer a return of 6.83 per cent. No fixed-rate bond can match this, after tax.
It may be gratitude for such returns that is causing higher-rate taxpayers to throw so much of the rest of their money into Premium Bonds, where you cannot depend on a return, although your capital is safeguarded. Mr Connolly says: “For many people, it’s more important just now to protect what you’ve got than to maximise your gains.”
NS&I seems to be delivering just what we need — not something you often hear said about any part of any government, ever.
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