Record year for National Savings

NATIONAL Savings and Investments (NS&I) has revealed bumper results as investors pile into its safer funds.

The Government-backed bank reported that in the year to March it sold savings and investments products worth £12.7bn - a 13% increase on the previous year. This brought the total amount invested in its funds to a record £66.5bn.

At the same time it raised £3.4bn in funds for the Treasury, which was more than quadruple the figure of £784m for the previous year.

Its performance is mainly due to a big increase in Premium Bond and guaranteed equity bond sales. Premium Bond sales shot up by 57% to £7.49bn, of which more than £1bn were sold in May 2003, when the investment limit was raised from £20,000 to £30,000.

NS&I chief executive Alan Cook said: 'The security we offer makes saving with the NS&I an attractive proposition, and customers continue to put their trust in us. Our guaranteed equity bonds were enormously popular with sales well over £200m. We also introduced the new Easy Access Savings Account, in place of the Ordinary Account.'

Anna Bowes, investment manager for Chase De Vere Financial Solutions. said: 'As interest rates have fallen and faith in the stock market has not fully restored, it has become more attractive to invest in Premium Bonds, where you stand a chance of winning a £1m jackpot.

'You are able to gamble without risking a stake so they are a bit of fun. However, I would guard against investing all your money in Premium Bonds, as there are, of course, instances where people don‘t win anything at all.'

Premium Bonds prizes, which start at £50, are paid tax-free, which has attracted many higher-rate taxpayers. The average rate it pays is 2.8%, rising to 3% in October.

The surge in sales of guaranteed equity bonds has been seen as a further sign of investors lack of confidence in equities. The bonds guarantees to return 105% of any FTSE 100 growth over five years.

Bowes said: 'Tis is a good way of investing in the stock market without the risk of losing your capital. And with a return of 105% of any rises the FTSE 100 experiences, it is quite generous. But you must bear in mind that if the stockmarket does not increase you will only receive your original capital back and if you do get any gains from stock market increases they are subject to income tax.'