NS&I offer an alternative way to boost savings

It states that the direct saver is suitable for those who want to manage their account online or by phone, with easy access to their money. It is not for savers who prefer to use an account at a branch or by post, want a fixed rate of interest or need a regular income from their nest egg.

The income bond pays 1.15 per cent gross, again with no notice of withdrawal and no penalty but with a maximum of £1 million.

It is deemed suitable for savers who want a monthly income at a variable rate, easy access to their money and have £500 or more to invest. It’s not for people seeking guaranteed returns or who want interest to build up so the investment grows in value.

Given many banks are offering a maximum 0.3 per cent gross annually for comparable terms, less security, and service levels which can be very poor, especially over the phone, you can see the attraction.

What’s more, the bank deposit protection scheme guarantees bank deposits up to £85,000 whereas HM Treasury guarantees 100 per cent of all national savings schemes, hence more security, especially on larger sums.

Another option in the portfolio is Premium Bonds, for which the annual prize fund interest rate is calculated to be 1.40 per cent per annum. Prizes start at £25 up to £1 million.

This is tax free, so may be particularly appealing for higher rate taxpayers.

Once again there is instant access without penalty. The maximum holding is £50,000.

Of course, bearing in mind the lottery element to Premium Bonds, you could be unlucky – the odds of winning for each £1 Bond number are 24,500 to 1 – and not earn the average prize fund interest rate.

I have a friend, now aged 67, who was gifted £50 of Premium Bonds at birth and claims to have never seen a return. Conversely, his 94-year-old mother, nowadays in a nursing home, put the maximum £50,000 from her savings into Premium Bonds about a year ago and is well chuffed at her successes.

So much so that my friend reckons, only part in jest, that the expectation along with the buzz of winning £50 here and £100 there is keeping her alive!

Once known colloquially as ERNIE – the Electronic Random Number Indicator Equipment machine (now located in the Science Museum) – Premium Bonds are in effect a more sophisticated version of bingo.

Not though for savers who want a regular income, are looking for guaranteed returns or are concerned about inflation eroding their savings. And it doesn’t end there. Guaranteed income bonds are pitched at 1.45 per cent gross on a one-year term and 1.90 per cent gross for three years. Guaranteed growth bonds offer 1.5 per cent gross on a one-year term and 1.95 per cent over three years.

Full details can be found at www. ns&i.com. Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice