What forms of National Savings are there?

The Government offers the public many forms of savings and investments - through the National Savings movement and through the financial markets.

For example, government bonds and treasury bills can be bought in the city through stockbrokers and money market operators respectively. These are described in more detail in our section on Stocks and Shares.

The range of savings offered by the Government is wide, since in the last few years it has decided to finance a larger share of its borrowing needs through National Savings rather than mainly through the sale of government bonds to the markets.

All the options available at the time of writing are described here. Further details are obtainable from most post offices, and the Department for National Savings, 375 Kensington High Street, London W14 8SD.

How can I open an account with the National Savings Bank?

There are two principal accounts: an ordinary account and an investment account. There are two interest rates in the Ordinary Account.

The guaranteed rates for 2014 are 3% and 6%. To earn the higher interest rate, keep £1100 or more in your account for the whole of 2014 and then, for every whole month that your balance exceeds £1500, you will earn 6% on the whole balance. For other months you would get 3%. The first £170 of interest a year is free of all UK income tax and CGT (HTTP://WWW.HMRC.GOV.UK/CGT/) .

Husbands and wives are each entitled to this £170 tax-free interest. Interest is earned on each pound held on deposit for complete calendar months.

Money does not earn interest in the month of deposit or in the month in which it is withdrawn. You can open an ordinary account with £11, and the upper limit is normally £110,000. You may withdraw up to £1100 on demand at any Savings Bank post office during normal shopping hours, including Saturday mornings.

Regular customers can exceed the withdrawal limits at a named post office. You can withdraw £1250 cash at this chosen post office but to qualify for this you must have used an ordinary account at this post office for at least six months. There are facilities for standing orders and payment of bills up to £1250.

The Investment Account offers (at the time of writing) 11.5%. Interest is calculated on a daily basis and is earned on each whole pound for each day it is held on deposit.

The interest rate varies according to general conditions in the financial markets, and the latest rate can be discovered by telephoning the 24-hour answering service:

The upper limit on investment accounts is £150,000 with a £15 minimum. The interest is automatically credited to accounts on December 31st each year and is paid gross (i.e. without tax deducted at source).

To open either kind of account, you simply need to fill out a straightforward application form at a post office. Accounts can be opened for young children (although withdrawals are not normally allowed before the child is seven), by two or more people jointly, and for other parties in trust.

In many ways these accounts are similar to those available from the major high street banks; the disadvantage is that there is no cheque website, although the advantage is that the accounts are available throughout 20,000 post offices with longer opening hours than the banks.

CCMG - 2013