National Savings & Investments (NS&I) today relaunches its Investment Account, but it still offers poor value, despite an increase in the savings account’s interest rate.
NS&I’s Investment Account goes back on sale today with an interest rate of 0.75%, up from the previous rate of 0.2%-0.3% AER. However, this is less than a quarter of the interest available on the top-paying instant-access accounts available elsewhere.
The Investment Account is now a postal-only savings account. It is no longer possible to deposit or withdraw money at the Post Office. Instead, deposits and withdrawals must be made directly with NS&I by post. Regular savings deposits can also be set up by standing order.
How do other NS&I savings accounts compare?
NS&I Easy Access Savings Account
NS&I is no longer accepting new applications for its Easy Access Savings Account and all existing accounts will be closed on 27 July 2012. The account currently pays just 0.3% AER on balances below £10,000, rising to 0.7% AER on balances over £50,000. Either way, you’d be much better off switching today to a Which? Best Rate savings account.
NS&I Direct Saver Account
The NS&I Direct Saver Account pays a higher rate of 1.5% on balances of £1 or more. Available online or by post, this account, too, is uncompetitive when compared with bank and building society alternatives.
Who are NS&I savings accounts good for?
Interest on NS&I savings accounts is taxable, but is paid gross. If you’re a non-taxpayer, these accounts could be a convenient option as you won’t have to go to the trouble of reclaiming any interest. On the other hand, non-taxpayers can already give their bank or building society a completed Form R85, which allows interest to be paid gross. You’ll probably get a better interest rate from a Which? Best rate account than you will from NS&I.
Basic-rate, higher-rate and additional-rate taxpayers will also receive NS&I interest gross, but you’ll have to pay tax at your marginal rate. If you’re a basic-rate taxpayer and don’t currently fill in a tax return under self-assessment, you may find that having to account for tax on NS&I savings products is too much hassle.
How safe are my savings?
Savings with NS&I are very secure, as they’re guaranteed by the government. However, savings with UK-licensed banks are also safe, up to a maximum of £85,000, under the Financial Services Compensation Scheme (FSCS). For full details, read our free guide Are my savings safe?
- Which? Best Rate savings accounts – get a better rate on your savings with a top-paying account
- Which? Best Rate cash Isas – all the best tax-free savings deals from instant-access to 5-year fixes
- Are my savings safe? – find out what protection your savings have if your bank goes bust