National Savings Accounts
National Savings & Investments (NS&I) offer a range of savings and investments to suit different people's needs. Because HM Treasury backs National Savings and Investments, you can rest assured that any money you invest with them is 100% secure.You can use NS&I if you want
• tax-free investments
• guaranteed returns
• high potential returns
• to save for a rainy day
• to invest for a child
• a monthly income
They offer a range of products:-
Chance every month to win £1 million or one of a million prizes
The easy way to save tax-free
Fixed Interest Savings Certificates
Guaranteed returns, tax-free
Index-linked Savings Certificates
Guaranteed to outgrow inflation, tax-free
Tax-free investment for your children's future
Regular monthly income at attractive variable rates
Pensioners Guaranteed Income Bonds
Guaranteed monthly income, exclusive to investors over 60
Guaranteed returns with a choice of growth or income
Fixed interest rates that rise over 5 years
Stock market growth potential with no risk to your capital
Straightforward one-month notice account with passbook
Tiered interest rates, cash card and telephone service
NS&I Interest Rates
For full details of the rates for each product, including year-by-year rates for Savings Certificates, Children's Bonus Bonds and Capital Bonds visit their website at www.nationalsavings.co.uk.
As well as the range of Certificates, Bonds they also offer Guaranteed Equity Bonds (GEB), which are available in limited Issues. Their Issue 10 GEB , offering a potential gross return of 125% of any FTSE 100 growth over five years, is currently on sale until 5 July 2005 (or earlier if fully subscribed).
Tax-free saving with NS&I
Many financial organisations offer tax-free products such as ISAs where any interest or income you earn is sheltered from the taxman, does not have tax deducted and do not need to be declared on your tax return. NS&I offers a Cash mini ISA - one of the easiest ways to start saving tax-free.
They also offer a unique range of other tax-free investments:-
• Premium Bond
• Index-linked Savings Certificates
• Fixed Interest Savings Certificates
• Children's Bonus Bonds
Understanding gross and net interest
Whether you are a UK taxpayer and if so, the rate at which you pay tax is a key factor in making a decision to invest.
You will need to find out whether the interest or return on the investment you are considering is tax-free, net or gross of tax. This will help to ensure that, when comparing rates between products and/or providers, you are comparing like for like.
Gross interest
If you are a taxpayer and you are receiving interest, gross then you will need to declare any interest you earn on your tax return.
If you are a non-tax payer then you can keep your gross interest in full.
Net interest
Where interest is paid net, the tax is deducted before you receive the interest, at the applicable savings rate (currently 20%).
If you are a basic taxpayer then you do not need to worry about anything further.
If you are a higher rate taxpayer then you will need to include details of the interest and the tax paid on your tax return.
The Inland Revenue produces "A guide for people with savings" (IR110). Copies are available from any tax office or Inland Revenue Enquiry Centre or visit www.inlandrevenue.gov.uk .
Onshore Investments
An investment bond is technically a single premium life assurance contract although the life cover aspect is only nominal. Bonds are collective investments in which the investments of many individual investors are pooled together. This pooling enables relatively small investors to benefit from the economies of scale made available to institutional fund managers.
A wide choice of managed, general and specialist funds are available offering investment opportunities in equities, property and fixed interest securities. Bonds enjoy the facility to switch between these internal insurance company funds at a reasonable cost if desired. Although classed as single premium investments, 'top up' facilities are offered for further amounts to be invested either on a regular or ad hoc basis.
There are two types of Onshore Investment Bond:
- Unit Linked - These Contracts offer a wide choice of funds, often with a choice of Investment Managers. The facility to switch between funds and Fund Managers is often available without administrative charge.
- With-Profits Bond - For the Investor requiring a lower rate of risk, the With-Profits Bond can offer an attractive proposition. The capital is largely protected against stock market swings. The returns to the Policyholder are smoothed by the Life Company Actuary to give a steady growing return. Whilst a Unit Linked Investment Bond is likely to deliver a larger return over the longer term, the With-Profits Bond serves as a useful compromise between full market exposure and deposit based investment. There is a large choice of such Bonds available, and expert advice on the choice of the Company is essential.
Taxation
The underlying funds of Investment Bonds are subject to tax on income and gains. Any 'income' you need is achieved by selling units. It is most likely to be in your best interest to defer taking income from the bond for at least the first 12 months.
Current legislation allows 5% of the capital to be withdrawn for up to 20 years with no immediate liability to tax. Withdrawals in excess of 5% are only taxable if they take you into the higher rate tax band.