Ask Anna - I have money maturing with NS&I – where is the best place to put it / can I not get anything that would match or beat inflation?

26th January 2018

Savers Question 

I have money maturing with NS&I – where is the best place to put it / can I not get anything that would match or beat inflation?

  

Anna's Answer

This is a pretty broad question, as where you should put your maturing funds depends on a number of factors, including the amount, the type of product and your need for the money going forward.

 

NS&I has a number of different products, some of which are competitive and others that are not.

 

One of the main benefits of NS&I is the unique protection that you have on all deposits with them. For example, NS&I Direct Saver has a maximum deposit limit of £2 million per person – if you deposit that much, it is all protected by HM Treasury, unlike a bank or building society where only a maximum of £85,000 per person, per banking licence is protected by the Financial Services Compensation Scheme (FSCS).

 

You could earn more interest by depositing no more than £85,000 with one or more providers, so that the money is earning the best rates possible, while still remaining safe.

 

For example, if you have £150,000 you could deposit the whole lot with NS&I Income Bonds, which is an easy access account paying 1% gross/AER, earning £1,500 in gross interest over 12 months. Or you could split the money and deposit £85,000 with National Counties Building Society earning 1.31% (£1,113.50 gross over 12 months) and the remainder with RCI Bank, Tesco Bank or Post Office, paying 1.30% (£845 gross annual interest). In total your money, deposited with two providers, would earn £1,958.50 – so over £450 more than the NS&I Income Bonds. That’s worth having.

 

However, if you have £2million you might not relish the thought of opening 25 different accounts, so NS&I might be a good option for at least some of the money – even if it means not earning the very best interest.

 

The same applies to the majority of other accounts offered by NS&I, regarding the interest rates on offer – although at the time of writing the 3-year Guaranteed Growth Bond – issue 56 is a best buy, paying 2.20%. So, if your 3 Year 65+ Guaranteed Growth Bond is coming up for maturity and you are happy to tie it up for another three years, you can’t do better than rolling it over. Read our recent article on what to do with your maturing ‘Pensioner Bond’ , for more information.

 

We have compiled a list of NS&I products currently available (below) with links to Best Buy tables to compare NS&I products with the best of the market.

 

NS&I also has some products that are no longer on sale to new customers, but if you already have them, you can roll them over on maturity.

 

NS&I Index Linked Certificates. If you are lucky enough to have some of these, you should think carefully before encashing them. These accounts are some of the only savings accounts that can beat inflation, as they index link to the Retail Prices Index (RPI) plus a small amount on top. And the even better news is that RPI is higher than the Consumer Prices Index (CPI), which is the more widely used inflation measure and is applied to index linked products such as state benefits.

 

And the returns are tax free – so they are even more valuable to Taxpayers who are earning more interest than the Personal Savings Allowance (PSA) that applies to them.

 

You can renew up to the total value of your maturing Certificate, including all the interest and index-linking you earned. Or you can cash in some of your investment and renew the balance. You won’t be able to add any extra money to your Certificate.

 

The options on maturity will normally include:

  • renewing your Certificate for another term of the same length
  • renewing it for a term of a different length (only 3-year and 5-year terms available)
  • cashing it in

At the moment, in addition to the 3-year and 5-year terms, if you already have a 2-year Certificate, you can choose to roll over for a further 2 years. But this is the only circumstance in which you can choose a 2-year term.

 

The other unique product that NS&I offers are Premium Bonds – an old favourite.

 

Every £1 you invest into Premium Bonds, buys you a unique Bond number with an equal chance of winning a monthly draw prize of between £25 and £1million – although there are only two £1million prizes per month. There is no guarantee that you’ll win a prize – but anything you do win is tax free.

 

Not all NS&I products are tax free, so check the terms and conditions carefully to make sure you know what tax you might need to pay.

 

 

 

Check out our Best Buy tables for more information about these or other products available.

 

For more information, call one of our savings experts on 0800 321 3581 – or email us at [email protected]

 

 

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