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Media centre /
Press releaseSHORT-TERM SAVINGS NEED A GOOD HOME TOO06 July 2005The Smart Money is in Premium Bonds Whether it is for a house deposit, wedding or even a holiday, we often build up our short-term savings in instant access savings accounts or even current accounts for ease and flexibility. However, recent research from National Savings and Investments (NS&I) shows one in five (19%) instant access accounts pay less than 2%* before tax, suggesting many Brits may be needlessly sacrificing a good return for access. In the UK over £204 billion is held in instant access accounts – almost half of all cash based savings (£513 billion)**. The easy access offered by these accounts makes them attractive to savers with short-term goals, for example, those looking to build up money for school fees or a tax bill around the corner. However, the average rate on instant access accounts is only 2.8% (see notes to editors) and many pay less than 2%. Many savers could obtain a far greater return by switching to Premium Bonds, which gives savers access to their money within eight days and will offer a prize fund rate of 3.25% from 1 August. This means customers with the maximum £30,000 invested can, with average luck expect to win 15 prizes a year – more than one a month. £919 million extra
Premium Bonds are a form of saving money but, instead of interest payments, investors stand to win tax-free prizes from £50 to £1 million each month. Each £1 invested buys a unique Premium Bond number and these go into a monthly draw. As the Premium Bond draw is completely random, prizes cannot be guaranteed, however customers have the peace of mind that their capital is 100% secure and can be cashed in at any time. Repayment of Premium Bonds takes less then eight days. Customers can invest between £100 and £30,000 per person and Premium Bonds can be bought online at www.nsandi.com, by telephone on 0500 007 007, standing order, by post and over the counter at Post Office branches. Tax-free benefits In addition, while the average rate on an instant access account is 2.8% gross, which is then subject to tax, NS&I’s Premium Bond prizes are tax-free (see notes to editors). This means that the Premium Bond prize fund rate of 3.25% is equivalent to 4.06% for a basic rate taxpayer and 5.42% for a higher rate taxpayer. More for your money Karen Jones, marketing director at NS&I, comments, “While we often put a lot of thought into where to put our long-term savings many Brits simply choose the easy option for their short-term savings. Access and flexibility are important but savers shouldn’t have to pay for this. “Our new research has illustrated the amount of money potentially languishing in low-paying accounts, which could be better invested elsewhere. It is easier than ever to buy Premium Bonds and savers could find themselves getting more for their money as well as good access. “While investment portfolios should be balanced, savers would benefit by holding some of their savings in Premium Bonds which, for a person of average luck, produce favourable returns as well as the chance of scooping one of the two monthly £1million jackpots. As the prizes are tax free, the potential returns become even more attractive to basic and higher rate taxpayers.” -Ends- Notes to Editors: Sources: *Average rates on Instant Access accounts come from the average of current Instant Access account rates which return money in less than 8 days listed by Moneyfacts as of June 2005. The percentage of accounts of a certain rate are taken from all Instant Access account rates listed by Moneyfacts as of June 2005. **Total stock value of Instant Access accounts comes from data from CACI for NS&I as of Q3 2004.
Premium Bonds
National Savings and Investments National Savings and Investments (NS&I) is one of the UK’s largest savings and investments providers with around 26 million customers and £68 billion invested. NS&I provides a wide range of savings and investments, including Premium Bonds, Savings Certificates, Income Bonds, Children’s Bonus Bonds, Guaranteed Equity Bonds and the Easy Access Savings Account. NS&I is able to offer a 100% capital guarantee on all the products it offers because it is backed by HM Treasury. NS&I, formed in 1861, is a government department and an executive agency of the Chancellor of the Exchequer.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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