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Media centre /
Press releaseBRITISH SAVERS: BEWARE THE 'RAT TRAP'02 March 2004National Savings and Investments (NS&I) is urging British savers to beware of the RAT trap - the 'Returns After Tax' phenomenon where recent research from NS&I found that three in five savers (58%) ignore the impact that tax has on the actual return they receive on their savings. NS&I believes savers should consider their tax status when looking at the rates offered by savings providers. Advertisements often offer headline grabbing rates but tax-paying savers should be more aware that the published rate may not be the return they actually receive after any tax has been paid. NS&I offers a variety of tax-free products including Index-linked Savings Certificates, Fixed Interest Savings Certificates, Cash mini ISA and Children's Bonus Bonds where the rate offered is the rate they receive. There are also Premium Bonds where all prizes are tax-free. The research also found that nearly two in five people surveyed (37%) said they bear tax in mind when looking to save money, with only a further 4% saying they sometimes take it into account. Age Younger people fall into the RAT trap more than older people, with over half (58%) of people aged 25-34 saying they don't consider tax when looking to save money. The wisest savers are those aged 55-64, with two in five (43%) saying they do think of the tax implications when saving. Regionally Wales and the West appears to be home to the most astute savers, with 48% saying they do take tax into account and another 2% saying they do sometimes. But in the Yorkshire and Humberside region, just over one in four people (28%) say they consider the amount of tax they will have to pay on their savings and 5% say they do sometimes. NS&I says savers can avoid the RAT trap and maximise the returns earned on their savings by looking at tax-free offers. Gill Cattanach, National Savings and Investments marketing director, said: "On the surface headline-grabbing interest rates may appear to provide a good return but savers need to look a little deeper and consider the return they will get once they've paid tax on their savings. "However, people could shelter some of their cash in tax-free savings and investments. Initially, this could be up to as much as £74,000 in Fixed Interest and Index-linked Savings Certificates, an ISA, Premium Bonds and Children's Bonus Bonds.' The 'RAT trap' versus tax-free National Savings and Investments' Index-linked and Fixed Interest Savings Certificates offer tax-free returns and, in the case of Index-linked Savings Certificates, are inflation-proof. The table below shows the current interest rates on these products and the equivalent gross rates other taxable products would need to offer in order for basic and higher rate taxpayers to achieve the same returns after tax. Index-linked Savings Certificates
Fixed Interest Savings Certificates
Saving tax-free Currently, money can be sheltered in a variety of tax-free products available through National Savings and Investments (NS&I), in ISAs from NS&I and a range of other financial providers and with Friendly Societies. With NS&I, it is possible for an initial total of £74,000 to be invested tax-free. £10,000 can be saved in each issue of Fixed Interest and Index-linked Savings Certificates (both available in two terms, allowing a potential investment of £40,000), £30,000 in Premium Bonds, £3,000 each tax year in a Cash mini ISA and £1,000 per Issue of Children's Bonus Bonds (for under-16s). All NS&I's tax-free savings are available through Post Office branches. Savings Certificates and the Cash mini ISA are also available to buy over the phone seven days a week on 0500 500 000 or online at www.nsandi.com. Additional tax-free investments can be made in Savings Certificates and Children's Bonus Bonds whenever new issues are introduced. ENDS Notes to Editors1. The National Savings and Investments survey was conducted by TNS via PhoneBus between 6-8 February 2004. The sample size was 1,011 adults. 2. The rate of inflation is calculated using the Retail Price Index (RPI). The RPI measures the average change from month to month in the prices of goods and services purchased by most households in the United Kingdom (Office of National Statistics). 3. National Savings and Investments is one of the largest savings organisations in the UK, offering a range of savings and investments products to 30 million customers. All products offer 100% capital security, because they are backed by HM Treasury. 4. NS&I is the exclusive sponsor of The Classical BRIT Awards, the UK's premier classical awards show, at the Royal Albert Hall on 26 May 2004. 5. Further information and digital images are available from the NS&I media team. An ISDN line is available for interviews.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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