Back in February, you might have read ‘Could premium bonds pay in 2023 as prize pots rise?’, your guide to the National Savings and Investments (NS&I) products on offer.
The money you invest with NS&I is effectively a loan to the government and is HM Treasury-backed. This means your money is safe, but are you getting the best returns?
Rates and prize pots might be increasing but some alternatives to NS&I are worth considering. These might offer better rates or increased chances of a prize, and your money will still be protected, up to certain limits.
Keep reading for a closer look at some NS&I alternatives and why they might offer better value in the long term.
The alternatives to Premium Bonds
Around 22 million people are entered into the Premium Bonds prize draw each month. With two top prizes of £1 million at stake, it’s easy to see why.
But with odds (per £1 stake) of 1 in 60,095,684,349, you might consider looking elsewhere for a higher chance of smaller prizes.
Halifax offers a monthly prize draw for customers with at least £5,000 in a qualifying account, with prizes of £100,000, £1,000, and £100.
You’ll still need to think carefully before you switch, though. The available rates on qualifying accounts – even with the added benefit of a potential win – could still be less than the best rates available elsewhere.
While the Halifax Fixed Saver account pays a competitive 4% interest annually, the Halifax Everyday Saver pays just 0.7%.
Nationwide’s Start to Save regular savings account offers savers a 1-in-34 chance of taking away a £250 share of a £229,000 prize pot.
The 5% interest rate offered on this account is reasonably competitive but there is a limit to how much you can deposit. Currently, this stands at £25 to £50 a month for 24 months and you must pay at least the minimum amount each month for six months to be eligible.
The next draws are due to take place in August 2023 and February 2024.
Long-term returns might be a better option
There are plenty of pros to Premium Bonds and NS&I products. Your money is safe, easy to access, and in the case of Premium Bonds, there’s the chance of winning life-changing money.
But NS&I rates are unlikely to be the most competitive on the market. And Premium Bonds don’t pay any interest at all.
You might be better off with an instant access savings account, fixed-term bond, or ISA, so shopping around is key.
Remember too, that with inflation remaining high (despite dropping below 10% in April, for the first time since June 2022), savings are likely to be losing value in real terms. This might mean investing is your best option.
Investing in a Stocks and Shares ISA, for example, could offer the chance of inflation-beating returns if you are willing to accept the additional risk.
You’ll need to be sure about your long-term goal and understand your risk profile and capacity for loss. If you think you might like to turn to investing, or you want to enlarge your current portfolio, get in touch and we can help.
The FSCS limit means your money is safe
As we have seen, your money is safe when you save or invest with NS&I. This is because you are effectively lending money to the UK government and NS&I is Treasury-backed.
But you also benefit from financial protection when you keep your money elsewhere. This is thanks to the Financial Services Compensation Scheme (FSCS).
In most cases, the money you hold in FCA-regulated banks and building societies, investment companies, or with pension providers (along with countless others) is protected if that organisation fails.
Your money is protected up to a maximum of £85,000, although if you have a joint account, cover typically rises to £170,000.
While other rules apply, you’ll generally find your money is protected, up to the above limits, so remember that NS&I products aren’t the only “safe” place for your money.
Get in touch
HA&W’s team of finance experts can help to find the right savings and investment solutions for you, based on your goals.
So, if you have any questions about NS&I products or the alternatives on offer, contact us now to find out how our Chartered financial planners could help you.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate NS&I products.
